MINER.AL INDUSTRY AND CEIIITA'S REGIONAI DEVELOPMENT: AI{ EXPLOR.ê,TORY ANÃIYSIS
BY
LEI ZEANG
A Thesis submitted t.o the Faculty of Graduate Studies in Partj-al FuJ-filment of the Requirements for the Degree of Doctor of Philosophy.
Department of Geography The University of Manitoba Winnipeg, Manitoba March, 1995 NatíonalLibrarv Bibliothèque nationale ffi@ffi du Canada
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AN ÐTPLORATORY ANAI.YSIS
BY
LEI ZEANG
A Thesis submitted to the Faculfy of Graduate Studies of the Universify of Manitoba in partial fulfillment of the requirenents of the degree of
DOCTOR OF PEILOSOPEY
@ 1995
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PREFACE Throughout history mineral industry has been a determinant factor in the evolution of societies and civilization. In fact, few industries have imposed and experienced, such economic and political shocks as the mineral industry, especially since the oil crisis of the 1970s. It can be said that the development of mineral industry is a reflection of the way in which industry, government pot¡rer and society as a whole is organLzed,, and it is a reflection of the way in which the mineral industry is perceived. Minerals are seen as beíng vital to the economic Arowth of developing nations and future well-being of a mater manufacturing nation or region and as such the exploitation and the processing of those resources is deemed to be of paramount importance, and this has intensified the interest in research of resources. Unfortunately, the renaissance in the minerals activities Ín most parts of the developing countries during the J-ast decade has gone out of fashion and. only served to arouse very considerable interest in potential- benefits to national economies and in environmental impacts, and much less in the consequences for regional d.evelopment. AT¡rareness of this neglect provided the initiaJ. stimulus for this thesis. f am very grateful to Pro. D Todd, my supervisor, for his invaluable help and ad.vice, with fully understanding and tremendous patience, throughout the preparation and writing of the thesis. r would like to extent my deep appreciation to Dr. R.c. Tiwari, a professor in the Department of Geography, and Professor T.Henley, the assistant director of the Natural Resources Institute, for ïr their useful suggestions and. helps. r am also ind.ebted to Dï. w. Norton, a professor and the former head of the Department of Geography, for his kindry encouragement and help during my study in the Universitv of Manitoba. III
ABSTR.A,CT Societal achievement in the world is dependent to a great extent on the development of mineral Tesources. The veïy obvious impact of minerals on Mants evolution can be traced in terms of Mants acquaintance with minerals--the pre-stone Age, the stone Age, the Bronze Aget the rron Age, and the Atomic Age. Rapid growth Ín national economies, especially in large countries, is nowadays highly dependent on access to wide and eveï-growing supplies of minerals at the lowest cost. Mineral industryz âs a determinant factor in regional development, creates millions of jobs in the world, and mineral activity, including rnining- related activities, provides the prerequisites for many production sequences and prepares the regions for achievement of the "take-off" point along their paths to fully-fledged development. Indeed, the importance of mineral activity can remain vital even for longer because of uneven distribution of mineral resources and changing demand of mineral products which together conspire to grant a region longstanding comparative advantages . This thesis represents an exploratoïy ïesearch work to analysis the relative positive role of mineral activity in regional development, examining the interaction between economic Arowth and the development of mineral industry on the one hand and the role of mineral industry in the early stage of industrialization on the other. Examination of the contemporary role of mineral industry in regional development seemed to lead naturally to an analysis of its role in china, the largest deveroping country and one of the IV T¡rorldt s leading mineral countries. The theory of intensive use of mineral product, input-output, factor analysis and cJ-uster analysis are treated as a conceptual underpinning and a powerful tooJ. to expose the significant relationships between of mineral industry and regional development. V
COI{TTENTS PREFACE I ABSTRACT ITI LIST OF FIGTIRES VII LIST OF TABLES x LIST OF APPENDIX XIV Chapter I. Introduction ...1- 1.1 Background and Objective of the Study L.2 Methodology and Data 1.3 Organization of the Study Chapter II Economic DeveJ-opnent and the Demand for Mineral. Materia]-s 24 2.L Introduction 2.2 Ideol.ogical- Ground for Economic Development 2.3 Changes Inherent in Economic Structures 2.4 Pattern of Capital- Investment 2.5 Consumption of Mineral- Materia1s 2.6 Conclusion
Chapter III I'fineral Materia1- Supply 65 3.1 Introduction 3.2 Resource Bases 3.3 Po1-icy Framework for tJre Development of Mining Industry 3.4 perfornance of the Industry 3.5 Regional pattern of the Mineral- fndustry 3.6 Conclusion Chapter IV Mineral. Industry and fts Relevance to the Ì¡üorld Market . . .I04 4.L Introduction 4.2 Gror¡¡th and pattern of Foreign Trade 4.3 Rel-ationship Between t'{ineral Commodities and Foreign Trade: The Cases of Oi1- Export and fron Ore Imports 4.4 Conclusion Chapter V The "I'Iineral-Dominant" Stage ...L42 5.1 Introduction 5.2 Initiating tüew Location patterns 5.3 Mining and Regional Gro¡rth: the Initial- Impetus 5.4 Mineral- Production and Regional Development: VI A Fundamental Factor 5"5 Conclusion
Ch.apter VI lllning-Based Diversification . . .186 6.L Introduction 6 .2 lliníng Impacts: tJre Evidence of Input-Output Mul-tipJ-iers 6.3 f'fi-ning fmpacts: the Development of For¡vard and Backward Linkages 6.4 Obstacles to Mining Area 'Conversion': Environnental- Impacts of Mining Activity 6.5 Conclusion Chapter VII Aggregate fmpacts and Centre-Periphery Impl.ication ...224 7.L Introduct'ion 7.2 T'h.e Model.I.ing System: Description progressing to ExpI-anation 7.3 Appl.ication and Results: the Model's Veracity 7.4 Conc,]-usion Chapter VIII Summary and ImpJ-ications ...253
BIBLIOGR.APHY 280. . -286 VÏÏ
LTST Of' FTGURES
l-. Figure 1-t- Major fndustrial Cities in China, 1990 4 2. Figure I-2 Relationship between Intensity of Steel Use and Per Capita Income in the United States, 1B88-1967 7 3. Figure 1-3 Theoretical Life-Cycle Curve of Mineral Consumption for Groups of Countries 7 4. Figure L-4 A Sequence of Stages in Spatial- Organization 1g
5. Figure 1-5 A LogicaJ- Framework for the Study Zs 6. Figure 2-1 Composition of Aggregate Demand in China and Other Countries, 1990 (Share of GDp) 38 7. Figure 2-2 Energy Consumption Trends in China, L9S3 -90 s2 B. Figure 2-3 Key Mineral Material- Consumption Trends in China I L953-90 53 9. Figure 2-4 I-U of Primary Energy by Selected Countries, l-950-90 55 10. Figure 2-5 I-U of Iron Ore by Selected Countries, 1950-90 56 11. Figure 2-6 Sources of pig fron for the Steel-Making fndustry in Beijing-Tianjin-Tangshan Region of China 60 L2. Figure 3-l Metallurgical and Non-fuel Mineral Deposits in China 69
13. Figure 3-2 Non-Renewable Energy Resources in China 70 L4. Figure 3-3 Composition of Capital- Investment in China's Mineral fndustry, L950-90 73
15. Figure 3-4 A Schematization of tWalking on TrÂro Legst Policy 76 L6. Figure 3-5 Contribution of the Mineral fndustry to China's Economy, 1990 89 L7. Figure 3-6 Distribution of Coal Mining Industry in China/ 1990 95 VIIÏ 18. Figure 3-7 Crude Oi]- and Natural Gas Extraction and Refining fndustry in China I L99O 96 19. Figure 3-B Iron and SteeJ- Industry in China I Lgg} . . .101 20. Figure 4-L Newly Added Capacity of lron Ore Mining in China I L952-90 . . .I32 2L. Figure 4-2 Output of lron Ore in China for Selected YeaTs . . .133 22. Figure 5-1 Eighteen NewJ-y-Built Cities of China in the 1960s . . .150 23. Figure 5-2 Mineral-Based or Mineral-Related Cities in China, L990 . . .152 24. Figure 5-3 Railway Netr^rork in China, L949 . . .l-68 25. Figure 5-4 RaiJ-way Network in China I L990 . . .170 26, Figure 5-5 A Changing Pattern of traffic in China by Volume I L952-90 . . .L72 27. Figure 5-6 Composition of Railway Freight in China, by Selected Years . . .178 28. Figure 5-7 Regional CoaJ. Production and Consumption in China, L99O . . .181 29. Fígure 5-8 Major CoaI Flor,rrs in China | 1990 . . .L82 30. Figure 5-9 Coa1- Transport and nail-port System in China,1990 ...r83 31. Figure 6-1 Mineral-Based Industrialization in Liaoning . . .2L3 32. Figure 6-2 Energy Production and Transport in Eastern ChÍna . . .2L5 33. Figure 6-3 Main Pol-l-uted Cities in China I 1-990 . . .220
34. Figure 7 -l Modeling tr'rameTlrork of Factor Analysis and CJ-uster analysis . . .235 35. Figure 7-2 Socio-Economic Development Factor in China . . .243
36. Figure 7 -3 Mineral-Processing Development and Environment Factor in China . . .244 37. Figure 7-4 Coa1--Mining Development Factor in China . . .245 rX 38. Figure 7-5 Crude Oil-Mining development Factor in China . . .246 39. Figure 7-6 Vertical lcicJ-e plot Using ütard's Method ...249 40. Figure 7-7 Rescaled Distance Cluster Combined by Using Ward Method ...250 4L. Figure 7-B CJ-uster Analysis of China's Mineral Industry and Regional Development ...251_ 42. Figure 7-9 A Proposed Centre-Periphery Structure of China's negional Development by Cluster Analysis at the Distance of ZO ...260 43. Figure B-1 A Summary of Related Ïheories and Applied Methodologies ...272 x LIST OT TABLES 1. Table 1-1 sectoral contribution to National rncome, China I L949-92 (selected. years, *.) 3 2. Table L-2 China/s Urban population and City-Size Categories, 1949-90 (selected years) ... 3 3. Table 1--3 rntensity of use of rron oTe, Aluminum and Cobalt, 1951-90 9 4. Table L-4 Distribution of Minerals Consumption, Population and GNP in the Wor1d, 1990 (e") L2 5. tabJ.e 2-L Key Economic fndicators of China loutput and income data aJ.J- at comparable prices) 3l
6. Table 2-2 rnternational comparison of Growth Rates 31 7. Table 2-3 Gross social varue output, Nationar rncome and Capital-Labour Ratio 1billion l9B0 yuan) ... 34 8. table 2-4 Economic and production structure change in China 36 9. Table 2-5 composition of Aggregate Demand in china and Other Developing Countries I L965 and 1990 36 10. Table 2-6 structure change of rndustrial production in China 39 11. Table 2-7 The commodity composition of rnternational Trade in China and. Other Countries, I99O 44 L2. Table 2-8 The structure of the central Government's Investment in Fixed Assets in China I L9S3-90 46 13. Table 2-9 structural changes in rndustrial rnvestment in China 47 L4. Table 2-L0 ErasticÍties of Key Metals in Relation to GDP Per Capita 50 15. Table 2-LL Energy Elasticities in Relation to GDp peï Capita 50 L6. Table 2-L2 International Comparison of Energy Consumption 5g 17. Table 2-L3 china: Energy consumption per Ton production in Small and Large plants, 19Bl 5g XI
18. Table 3-1 Proven Mineral Resources of China, 19B5 7L 19. Table 3-2 Capital fnvestment in Mineral Sector (Hundred million yuan), 1953-90 72 20. Tab1e 3-3 China's P]-ant-Scale Classification and Distribution 77 2L. Table 3-4 Domestic Gross Output of Rural Areas in China (1990) 7B 22. Table 3-5 Introduced Complete Sets of Foreign Equipment From L979 to t9B5 B2 23. Table 3-6 Standard hlages by hlage Grades, Selected Industries, China, t_958 B5 24. Table 3-7 Output of Selected Mineral Commodities in China I L952-90 87
25. Tab1e 3-8 China's Regional pattern 92 26. tab]-e 3-9 Regional Patterns of Selected Mineral Commodities 92 27. Tab1e 3-10 Changing Emphases in China's Locational PoJ-icy 92 28. Table 3-11 Regional Production of Energy Minerals, 1990 94 29. Table 4-1 China's Foreign Trade in Value, 1950-90 . . .116 30. Table 4-2 Composition of China's Imports I LgS2-gO . . .118 31. Table 4-3 Composition of China's Exports, Lgs2-go .. .L2L 32. Table 4-4 Role of Oil- and Fuel In China's Total Export . . .L23 33. Table 4-5 OiJ- Export and OiJ. production in China . . .L26 34. Table 4-6 Principal Indices of Key Open-Cut Iïon Mines in China, 1985 . . .r34 35. Table 4-7 Volume of fmported lron Ore ...136 36. Table 4-8 Iron Ore Ex-Factory price lafter ,Iuly 19g4) . . .r37 37. Tab1e 5-1 New Cities Developed during the 1950s . . .L49 38. Table 5-2 Major function of Newly-Developed Cities, xrr 1950 - 60 . ..L49 39. Table 5-3 Cities' Economy Dominated by Mining Activities in China, 1990 . . .153 40. Table 5-4 Regional Pattern of population in China, 1952-90 (e.) .. "155 4L. Table 5-5 Regional Pattern of Industrial Endourment in Chinat L952-9O (e.) . . .155 42. Table 5-6 Regional Pattern of Stap1.e Commodities in Chinat L952-9O (e") . . .155 43. Table 5-7 Percentage Change of fndustrial- Investment in the State-Run Enterprises of China, by Province I L952-90 . . .159 44. Table 5-B Percentage Change of Newly-Added Capacity of Coa]. Production in the State-Run Enterprises of China, by province I LgS2-90 . ..L62 45. Table 5-9 Percentage Change of Newly-Added Capacity of Crude Oi]. PToduction in the State-Run Enterprises of China, by province I Lg52-90 . . .163 46. Table 5-10 Percentage Change of Newly-Added Capacity of lron Ore Production in the State-Run Enterprises of China, by province I L952-90 . . .L64 47. Table 5-11- Percentage Change of NeT^rly-Added Capacity of Stee]- Production in the State-Run Enterprises of China, by province, L9S2-90 . . .165 48. Table 5-L2 The Development of the Transport Network China I L949-90 . . .r7L 49. Table 5-13 fndicative Costs of Coal- Transpoït by Modes, 1989 ...r74 50. Tab1e 5-14 The Development of Mineral production and Railway Network in China, by provinces, 1990 . . .L76 51. Table 5-15 Selected Year of Net Coal Imported for Seven Regions . . .L79 52. Table 6-1 Types of Input-Output MuJ-tipJ-iers . . .196 53. rable 6-2 Output, fncome and Employment Multipliers for SeJ-ected. Industries: China I L9BT . . .198 XITI 54. Tab1e 6-3 Output, fncome and Enrployment MuJ-tip1-iers for Selected Industries: Shanxi province, L987 ...199 55. Table 6-4 Output, Income ancl EmploymenÈ Mul-tipliers f or Selected. Ind.ustries: Shanxi province, L987 . ..200 56. Table 6-5 General Patterns of Economìc Structure Shanxi and Liaoning, L9B7 . ..204 57. Tab1e 6-6 Impact Coefficients for Selected Industries, L987 . . .205 58. Table 6-7 Mineral-Based tndustrialization in the Central Area of Liaoning province I LggT . ..2L2 59. Table 6-B Data on the Air Quality of Chinese Cities in the Late 1970s . ..2L8 60. Table 6-9 Environmental fmpacts of Mineral Industry: China, L990 ...223 61. Table 7-1 Variable Explanation .. .236 62. Tab1e 7-2 Rotated. Factor Loading patter . . .239 xIv LIST OF APPEI{DIX Appendix 3-1. The Divisíon of China into Coastal and Interior Àreas . . .102 Appendix 3-2. The Divisj.on of China into Three Zones . . .103 Appendix 3-3. The Divisíon of China into Six negions . . .104 Appendix 4-1. Global Oil- Price Trends (1970-1990) . . .143 Appendix 5-1. fndustrial- Development in Manchuria (Northeast China): The Largest .ïapanese Co1-onial Frontier 188. . .190 Appendix 7-L. Basic Socio-Economic Indices of China ( 1990 ) 264. . .268 Appendix 7-2 Factor Output Data Set 269.. .270 1
CHAPTER I
sTUDy REGIOT{, RELEVAtitT THEORTES AND OBJECTIVES 1.1 Introduction Societal achievement in the world is dependent to a great extent on the development of mineral- Tesources. The veïy obvious impact of minerals on Man's evolution can be traced in terms of Marrts acquaintance with minerars--the pre-stone Age, the stone Age, the Bronze Age, the rron Age, and the AtomÍc Age. Rapid growth in national economies, especially in large countries, is nowadays highry dependent on access to wid.e and ever-gïowing supplies of minerals at the lowest cost. Mineral industry¡ âs a determinant factor in regional development, creates millions of jobs in the world, and mineral activity, including mining-related activities, provides the prerequisites for many production sequences and prepares the regions for achievement of the "take-off" point along their paths to fully-fledged d.evelopment. rndeed, the importance of mineral activity can remain vital for even longer because of uneven distribution of mineral resources and changing demands for mineral products; factors which together conspire to grant a region longstanding comparative advantages. This thesis mainly represents an exploratory undertaking to analyse the positÍve aspects of mineral activity in regional development, examining the role of mineral industry in the early stage of industrialization on the one hand and the interaction between regional development and mineral activity on the other. Examination of the contemporary role of minerar industry in 2 regional development seemed to lead naturally to an analysis of its role in China, the largest developing country and one of the world's leading mineral producers.
I.2 The China Context: A Brief Look
Before the mid-twentieth century, China r^Tas characterizeð. by dualism; that is, its economy could be said to revolve around a small modern secLor based on foreign capital and technology and a large traditional agricultural sector accounting for 90 percent of its population and 70 percent of its domestic products. Progress in industrialization in China did not occur until the new republic was founded in L949, and since then biJ-J.ions of yuan in capital investment and millions of workers T¡rere devoted to industri-al construction, particul-arJ-y heavy industry. With an annual growth rate of L7 per cent as opposed to the 13 per cent of the industry at large and accounting for 7 per cent of National fncome during the period between L949 and 1990, mineral industry was to be the leading sector in this effort. If one compares China's present economic structure and spatial- development leve1 with the situation prevailing at the outset of such transformation some forty years ãgo, it comes as no surprise to conclude that the progress in mineral-based industrialization in the country is both undeniable and impressive (see Table 1-1, Table l-2 and Figure l-1). Hohrever, in explaining the economic and. spatial consequences of mineral- based industrialization, one must rely on the developed body of regional growth theories. 3 Table 1-1 Sectoral Contributions to tìIationa]- Incomer China, L949-92 ( sel.ected. years, *.)
Sector L949 L952 L965 1980 1989 L992 Agricu1-ture 68 .4 s7 .7 46.2 36.0 31.9 29.2 Industry L2.6 19.5 36 .4 48.9 47 .4 49 .4 Construction 0.3 3.6 3.8 5.0 5.9 7.4 Transportation 3.4 4.L 4.2 3.4 4.L 4.8 Commerce L5 .4 L7 .2 9.4 6.7 LO.7 9.r Tota]- 100.0 100.0 100.0 100.0 100. o 100.0 Source: China Statistics Bureau (1993) China's Statistics Yearbook, 1993.
Table L-2 China's Urban PopuJ-ation and City-Size Categori-es, 1940-90 (sel-ected years)
Item L949 1980 1985 1990
Urban population (mÍllions) 57 .7 L9]-.4 250 .9 3 01.9 eo of total population 10.6 L9 .4 24.5 26.4 City-size cateqory Super city (> 2 million) I B 9 Huge city (2-L million¡ 5 L4 22 Large city (f-0.5 miJ-lion¡ 10 : 30 2B Medium-sized city ( 0.5 -O .2 mil.l-ion) L9 94 LI7 Smal-l city (<0.2 mil-I.ion) 34 L78 29L Tota]. 69 zit 324 467 Source: China's StatÍstics Bureau (1991) China's Urban Statistics Yearbook, 1991. Chen Xiang FIing (1991) 'China,s City Hierarchy, Urban Policy and Spatial. Development in the 1980s', Urban Studies, Vol.. 28, No.3, pp.34I-367.
1.3 Relevant Theories Three cogent theories underpin the approach adopted in this study; namely,' Material Intensive-Use Theory (IU), Export-Base
Theory and centre-Periphery Theory. rt is appropriate that some idea of their scope be given at' this juncture. Material- Intensive-Use Theory. Fund.amental to a discussion Urban Population (million)
O tt.o . 1.0-0.5 O 2.0-1.0 o o'5-0 2
0 360 720 km
Figure 1-1. Major Industrial Cities in China, 1990 5 of minerals and regional development is an understanding of the nature of change in modern economies. The characteristics of industrialization become apparent when viewed in reJ-ation to various classifications of modern economies as defined, for example, by Rostow (1960) in terms of his four principal stages of industrial-izat.ion. The first stage is dominated by agriculture with a minor industrial development. The second stage or the early stage of industrialization is characterized by very important industrial development. During this stage an economy is building up infrastructural- faciJ-ities, heavy industries such as coal and oil, steel, metal fabricating, heavy engineering, chemicals, pulp and paper , etc. ; and emphasizing the export of rar¡r mat.erials. Critically, it is also engaged in the allocation of appropriate technologies t.o the particuJ-ar mix of resource-oriented activities. It is an era of import replacement or substitution, usually conducted behind high tariff barriers. This is followed by a mass- consumption stage (nainJ-y represented by a gireat increase in the usagie of new kinds of metals rather than in the volumes of metals being consumed.), referred to as the late stage of
índ.ustrialization. It represents a period in whj-ch there is a strong drive towards automation and in which industries associated with the automobile industry are established (including, note, the vital electronics sector¡. FinaJ.J-y, there is a post-industrial stage in which the emphasis is on a search for quality. There is growth in certain kinds of services associated with this objective, such as those of prj-vate and pubJ-ic health, education and t'ravel. 6 Services and leisure-type industries become the leading sector of economic arowth. This classification of economic arowth is supported by the concept of a U-shaped mineral-intensive use or intensity-of-use ( I- U) pattern first advocated by Malenbaum in L973. In anaLyzi-ng long- run trends in the mineral demand of the United States, Malenbaum observed that the intensity of mineral use is a function of the level of economic development as reflected by a country's peï capita income. The exact nature oï specification of this relationship is determined empirically, and generally varies amongi countries and materials. In his work titled "World Demand for Raw Materiars in 1985 and 2000" (197B), Malenbaum argued that regularities in the historical patterns of demand for many metal and energy materials permitted the description of a life-cycle of material-intensity of use. In other words, the material-intensity of use is presumed to foJ-1.ow an inverted U. Such a cycle consists of three phases: growth (including introduction¡, maturity and decline. At early stages of indust,rialization, countries increase their mineral-intensive use (ru) as growth occuïs and peï capit.a income rises. The growth stage of IU, therefore, involves freeing of resources from agriculture for the construction of industrial plants, homes, roads and railways, motoï vehicles, and other material-intensive products. HoT^reveï, as per capita income continues to rise, d.emand. shifts towards services, which are less material-intensive, and. this sector expands at the expense of the construction and manufacturing sectors. In this shift, consumer ru (tons per million S of GpP) 300
1,000 2,000 3,000 4,000 Level of economic development (per capita GDp in $) Figure I-2 Relationship between Intensity of Steel Use and Per Capita Income in the United States, 1888-1967
Stage II (Maturity)
() Ø (H-
çØ 0.)
C)
q<
Ø
0) Ø (H-
() õ
Time Figure 1-3 Theo_retical Life-cyclecurve of Mineral consumption for Groups of Countries (After Clark and Jeon) I demand leads first to a sl-owing and eventually to a reversal in the upward rise in intensity of mineral use as peï capita income advances, and. the pattern of IU starts to enter a decline stage. Between the growth and decline stages, hoTarever, there is a transfer period, knovm as the maturity stage, in which the material- intensive use remains relatively stable. This is the basic rationale for the inverted U-shaped behavioural relationship that exists between intensity of metal use and per capita income. Furthermorez Malenbaum argued that this three-stage assumption of the material-intensive use hypothesis can be proved by the cases of less-developed countries (LDCs ), middle-developed countries (MDCs ) and developed countries (DCs). The particular stage of minerals demand exhibited by a country d.epends on the type of mineral considered and its stage of economic d.evelopment. crark and Jeon (1990¡ developed this concept, and they argued that individual minerals can be categorized into three basic gïoups according to their time of introduction and widespread acceptance in the world's mineral market (Figure 1-3). Categories and. examples of representative metals and energy materials aïe as follows: 1. old minerals--copper, iron ore' lead, tin, zj-.r:'c and coal; 2. young minerals--aluminum, chromium, mançtanese, morybdenum, nickel, vanadium, and. crude oiJ- as weJ-l as natural gas; and 3. new minerals--cobalt' germanium, pratinum/ raïe earths, titanium and. uranium. In general, minerals classified as old are those which are extensively employed in the early stage of industrialization. The 9 young minerals are commonly utirized when industrial diversification occurs and technology has advanced. New minerals are used primarily by developed countries that enjoy a high level of technological development and diversification. Table 1-3 provides an example to il-J-ustrate the patterns of intensity of use in the world between 1951 and 1975.
Table 1-3 Intensity of Use of Iron Ore, A1umilq¡ and Cobalt, 1951- L97 5
Iron ore PÌimarv Aluminum Cobalt Region Lesr-s5 196r-65 L97t-75 1951-55 1961-65 L97L-75 1951,55 I961-65 L97I-75 (1000 metric tons per bj-l-lion $ cDP, 1971 prices) (metric tons per billion $ cDP, 1971 prices ¡
I. W. Europe L04 .4 126.9 101.0 1565 ¿¿ó5 3056 6.4 J.A O.5 2. Japan 67 .O 267 .3 204.5 óoo 2258 4863 5.9 L4.7 15.3 5. U.Þ.4. 106.9 92.9 76.L 2I7 4 3002 JYIT 4. Former u.s.s.R L3t.L Lt2.5 L57.L 1363 2L06 24L3 2.O ¿.q 5.¿ 5. E. Europe 7L.9 LL7 .7 LLs.7 876 2647 5.0 o.J 5.Y 6. Africa 46 .4 s7 .9 53 .2 37 163 559 L3.2 L2.0 9.9 7. Asia 27 .9 46.2 49.8 140 764 L462 0.1 0.6 1.3 8. World 95. 0 121. 8 I09. 1 L47 8 2239 3097 5.6 Â^qq source: 1. united Nations "statistical yearbook" (various issues). 2. United Nations "Demographic yearbook" (various years). 3. "Metal statistics" Metallgesellschaft AG, Germany (various years).
National consumption of iron oïe (a typical old mineïal) is influenced by a countTy's leveJ- of national income, the living standard of its people and the structure of its economy. The changing levels and composition of demand for the total of final goods and services thus exercise a dominant force upon the level and pattern of intensity-use of this material. rt is not surprising' therefore, that the data embodied in Table 1-3 conform closely with the general observations above, which r,üere based on relationships that emerged from the range of raw minerals' studies. The worldts developed nations had in early years expanded their use 10 of iron ore for modern transportation, industry and. construction, and then usage declined rapidly. rntensities for this mineral in Europe and Japan r^lere moderate in the early 1950s, but peaked in the period of L96L-65 mainly on account of the effects of post-war economic recovery and prosperity. A movement to 1-ess intensive use began af ter L97 0, ho\,trever, when higher GDp peï capita ( oveï USç2'000) T^las achieved. Because of a higher level of GDp per capita (over US$3r000) prevailing even before the 1950s, the intensity of use of iron ore in the United States exhibits a trend of continuing decline for all these periods. By way of contrast, intensities in Africa and asia are rising, albeit from a veïy low base. They reflect the early expanding of economic growth based on the lower level of GDP per capita (around. US$f00). Most developing nations are increasingly involved in infrast,ructural projects--railways and other Lransportation and communications systems, dams for irrigation and por,üer, to say nothing of electric utilities. All this contributes to national output that is more iron-intensive and steel -intensive .
The record for the i-ntensity-of-use ( r-u) of pïimary aluminum, one of the key young minerals, is unequivocal. There is no evidence of an absolute decline anywhere, although the growth rates of I-U have become persistently lower in the main consumption regions. Foï example' during the period between 1965 and 1975 the growth rate of aluminum consumption in the usA registered only 30 peï cent in comparison with 9L per cent recorded in Asia. There remains an impressive and widening technical scope for the substitution of 11 aluminum for iron ore, nickel, tin, and. zinc in metal production, and for steel and copper in respect of metal- final goods, such as the expanding role of aluminum in electrical transmission equipment. Construction and transportation equipment (automobiles particularly) and an expanding array of consumer goods have become even greater users of aluminum in most part of the world. The rapid growth in I-U in developing countries combines a high income effect as the economies develop (or at 1-east industrialize¡, supplemented. with what is generally a positive substitution effect. As a resuJ-t of j-ts special qual-ities in making steel for high- temperature products ( "superalloys" for jet engines and rotor blad.es¡, coba]-t serves importanL non-steel uses associated with the magnetic and chemical properties of the meta1-. Extensive investment in technological research has contributed to this demand, particularly with respect to the combination of cobalt with aluminum and nickel in the permanent magnet, Alnico. On the other hand' cobalt has increasingly suffered from substitution, in some measure by nickel but mostl-y by the growth in importance of ceramic magnets. Since the late 1950s, Lechnological change has, on the whole, served. to make competing materials progressively less costly than cobalt. The I-U patterns for cobal.t in Tab1e 1-3 correspond closely with the pattern discerned with respect t,o iron ore and aluminum. Since about B0 percent of aII cobal-t r,'las produced in Africa during this period, data for this continent reflect inventory adjustment difficulties rather then trends in economic development. For Japan/ high intensities are interpreted. L2 principally as a consequence of the country's exports of goods containing cobal-t, such as office equipment. The IU concept has four significant implications for developing countries. First, it suggests that expanding mineral markets, both domestic and international, aïe a significant factor which enables LDCs to catch the benefits of industrialization. Second., it implies that the development of the old minerals should be accorded priority in the mineral strategy of LDCs rather than the young and the ner^T minerals r orr account not only of the f act that they need less capital and technology inputs which aïe reJ.atively scarce in LDCs but also because of the pattern of their domestic market. In 1990, for example, LDCs consumed L4.B million
Lonnes of pig iron, or about 26.6 per cent of theworld's total. By way of contrast, the share of the consumption of al-uminum foï LDC5 hlas only about 15 per cent of the world's total. Their pattern is
Table 1-4 Distribution of Minerals Consunption, Population and GNp in the !{orld, 1990 ( e.)
Group Pig lron Aluminum Coal Pet.roleum populat.ion GNp* LDCs 26.6 L4 .5 38.5 10.5 58.3 5.1 MDCS 27 .7 19 .0 26 .4 38.8 26.2 L6.2 DCS 45 .l 66.5 35.1 50.7 15.5 7 B .7 the World 100.0 100.0 100.0 100.0 100.0 100.0 Note * GNP L99L. Sources : Metallgesellschaft AktiengeseJ-J-schaft, Metal statistics L99L, Frankfurt am Main, Metallgesellschaft. AG. The WorJ-d Bank (1993) World Development Report, 1993, Oxford University pTess, OxforC. Unit.ed. Nations (L992) Energy Statistics yearbook, 1990r New York. 13 equally distinct with respect to energy consumption (see Table l- 4). Third, it suggests, therefore, that the first object of economic Arowth for developing countries is to build up a stable mineral-supply system in order to meet the demands of both domestic and international markets. Last, it hints at a fundamental relationship; namely, the rarger the population of a developing country, the bigger the potentiat of domestic market and., accordingly, the greater the demand for mineral development. Export-Base Theory Export-base theory or economic-base theory speaks j-n terms of a region/s comparative advantages which lead to the sale of goods that, in tuïn, directly oï indirectly provide resources to the commodity-exporting region. The inflow of resources' for its part, makes possible further development t,o the end that multiple gains are attributable ultimately to the original export. (North, 1955). This export-base theory has origins in the trade theories of Ricardo and MiJ-l-, and the locat.ion theories of Hoyt. The stock of resources, both natural to the region as weII as those obtained by it from tradeT seïves as a base for its economic growth. The theory of the export base has often been presented in the literature as an alternative to the deterministic development stages theory in accounting for regional economic Arowth. As its name implies, it stresses the importance of export industries in the region's economy that gror/ìr up within a framework of a national or international division of labour and can therefore respond to profit maximizing opportunities, in which factors of production can I4 be relatively mobile (North, 1955). According to the export-base theory, provided. there is an increase in demand, an increase in exports of surplus ïesources in a region can give rise to input requirements by exporting industry, requirements that take the form of factor services and intermediate products. rn turn, this leads to income payments by the exporting industry and /residentiary industries' supplying intermediate products and. services for export production. The additional income received by loca1 households is a catal-yst for further growth, resulting in consumption expenditures on d.omestic goods and imports. An increasing export production may engender three scenarios for promoting regional development. First, it can effect both the quantity and quatity of the labour force by both an increasing skilled rabour immigration into the host region and a greater requirement for more ad.vanced technology. As a result, the diffusion of more advanced. technology and skilled labour in the region is ].ikely to influence st.rongly the education and technical training of the local labour force. rf the export industry generates a more highly-educated and skílted. work-force, then it may encouragle technological change in the region either directly or indirectly (Baldwin, L963). Second, it can absorb more investment from outside when the export product is a relatively important input in the national production pïocess. Also induced capital formation in the region may take place in the investment-goods industries and services, which usually function in a forward 15 (usually defined as a proportion of an industry' s output used as an input by other industries) and backward (which exists when an industry purchases intermediate inputs from suppliers) linkage chain with the export product. Third, it can improve the accessibÍlity of the region to its markets; and local infrastructurar facilities such as schools, hospitals, dams, drainage systems, highways, railways and airports result, in large part' from the expansion of both the labour force and investment. It is significant that the region's export base is not a fixed datum; that is to sây, the base changes with timer âs currently produced private and. social goods help bring forth new goods that change the base to permit exports of capital, skills, and specialized services to J.ess-well-d.eveloped regions. In other words' as a region's income gror¡rs, indigenous savings will tend to spi1l over into new kinds of activities. As first these activities satisfy local demand, but. uJ-timately some of them will become export industries. This movement is reinforced by the tendency for transfer cosLs to become ress significant. As a result, the export bases of regions tend to become more diversified in tandem with their aggregate predilection to become moïe diversified. This is well illustrated by Thompson (L965) | who suggests a moder from which the folJ-owing synthesis is based. l. In Export Specialization, the local economy is the
lengthened shadow of a single dominant industry or even a single firm. 2. In the Export Complex, J-ocal- production broadens to other L6 products anJ.d'/or deepens by extending forwards or backwards in the stages of production, by adding local suppriers and/or consumers of intermediate products. 3 " In Economic Maturation (Local Service Sector fuberty¡, the principal expansion of loca1 activity is in the direction of replacing imports with new "ovürr use" production; the local economy fil.J-s out in range and qua1-ity of both busj-ness and
consumer services " 4 " In t'he Regional Metropo1-is, the l-ocal economy loecomes a node connecting and controlling neighbouring cities, once rivals
arrd now sateJ-lites, and the export of services becomes a major economic function" 5 " In Technical-Professional- Virtuosit.y, naLional eminence in some specialized skíll or econornic function is achieved. rTn re].ation to this model" minerar industry¡ âs a powerful instrument of regi-onal development, must be the leading sector of regíorral export irrdustry" and rnineral export-dependent activity can not only provide great opportunities to create ner¡r jobs, absorÌ: investment and more advanced technology f,rom the outsíde, and improve J-ocal inft.rastructural facilities" but it can also províde the prerequisites for other production sequences and pïepare the krost region for achj_evement of the "take*of f " poinL.
Centre-Periph.ery Th.eorSr - This theory dwells on the spatial. organization of human activity based upon the unequal distribution of power in economy and society.
A basic concept in this theory is cumul_ative growth. once a L7 Tegion (for whatever reason) gains an initial advantage oveï others, various forces tend to widen rather than red.uce the gap between them; once triggered, growth proceeds by "circular and cumulative causaLion", while spatial interaction with other regions tends to heighten the regional disparities by the process of 'backwash' (Myrdal I L957 ) " Although eventually counteracting 'spreadr effects may develop" these tend to be weaker, and cannot prevent the development of a tcenLrar (coïe¡-periphery, oï 'heartland-hinterlandT structure" The hinterland or peripheries of a nation develop a dependent relationship to the industrial heartland or centre with resource inputs, and persist in lagging behind j-t in development. When economic arowth is sustained oveï long periods/ some equilibrat.ing t,endency mõ.y occur and progressive irri:.egration of the space economy may resulto througrh outward fl_ows of growth impulses down the urban hierarchy and catalytic impacts on surrounding areas (Berryt L973|" However, the /powerr of the cerrtre to conLinuously innovat.e ïleT/ü dynamic f orms of aci:.ivii-y (Thompson, L96B ) is just as líkeJ-y to leave the periphery condernned
Lo a lower rate of Erowth" These central-peri-phery relations rrüeïe seen l:y John Friedmann (L966, as being reflecLed in the extenl_ of regional disparities whicho in turn, derived from the stage of development attained by the natior¡. cont^aining the regions. The stages delimited by Friedmann are worth elaborating la1so see
Figure 1-4) " 1" Pre*zmdwsLrial- soc-ietÍ'e^s occur where economies are highly l-ocalized and there is no nationally-integrated spatial .,.,. ..lbr4\,#i.::: ffi .. W#
:::::::i:.:i.li.:::.:ii::
Stage 3 A single national centre, stl'ong peliphelal subcentres. Pn: peripheries, SCn: subcentl'es.
Stage 4 A functionally-interdependent system of cities.
Figure l-4 A Sequence of Stages in Spatial Organization (after Friedmann) L9 framework. 2. TyamsiXiomal- societ.ze.s are characterized by rapid industrialization and "take-off" in which dramatic spatial shifts occur, especially in association with movement frorn agriculture to industry. A dualistic centre-periphery structure develops as investment is concentrated in favoured areas " The periphery begins to lag" though Tesource expl-oitation may trigger gror^rLh in some areas " Regional development l.evels diverge strongly. 3 " IndwsLria1- soc:-eLi-es are those approaching economic maturity where considerabl-e problems of regiorral_ backwardness emergie. Some areas are stranded. by depletion of thej-r resources or a drop j-n demand for thej-r rnajor product"
They need conversion to a ner,ir economic l¡ase. Regional policy
3:ecomes prominent" In time strong peripheral sub-centres may develop and promote regional convergence. 4 Post--i-ndusXria.l socieLies are the f inal oul,come; i-haf- is " " a space ecoTrorny with a functionally-interdependent system of cj-tj-es " More speculatívely" the periphery is absorbed and regional- balance achieved" MeLropolitan orEanizationo urban reneural and environmental quality become dominant planning concerns. In rel-ation to this model, regions are classified according to the problems that they pose for development. centre areas, consisting of metropolitan areas, are characterized by high promise for economic growth. Feriphery regions are those where natural 20 endor¡ments and location with respect to the centre areas suggest the possibility of greatly íntensified use of mineral ïesouïces (through spread effects) " Of particular importance in the context of this study is the periphery regions" since their development is frequently based upon large-scale investment in mineral resources. Periphery regions can involve substantial urbanization" with the cities acting as an agent for transformation of wilderness. The whol-e set of periphery regions form a spatiar system governed by the centre area"
l- " 4 Ohjectíves The pJ-an of this study is inspired by the framework of relevant theories out.lined above" Consideríng China's size and prolonged evolution" it is necessary to cons'Lruc'!: a set of targel-s in order to come to grips with the general hypothesis that. mineral- industry acLs as an instrurnent in furthering regional developnnent" rn this serrseo iL is expected that the development of rnineral- indus¿ry can act, as a cat.alyst, in effecting the st'ructural transf,ormatÍon of a country frorn a lower val,ue-added type, which is dorninated by primary products such as grain and foodsl-uff " t'o a higher val-ue- added one' whÍch is ted by manufacturi-ng goods such as machines and chemical products " so that a hi-gher growth rate of natj-onaJ- economy can be achieved in comparison with that which went before. As part and parcel of this structural transf,ormation, it is also expected that mineral ind.ustry will accelerate the concentration of economic activity" particularly manufacturing industry" through the 2L expansion of mineral-export and., in consequence, a centre-periphery pattern in regional growth will either be created or, if already present, nrill be reinforced" At one and the same time, then" the general hypothesis addresses aggregated, national*J-evel development and disaggregated" interregional aspects of development. In doing sor the targets, six in numberT are given below: A" peruse the changing pattern of mineral consumption and d.eve1.opment; B. examine the resource base and mineral supply; C" infer the degree of foreign trade in mineral product.s; D" define the initial- stage of mineral devel_opment; E. rnonitor the diversification of the mínera1 economy; F. establish tkre contribution of the rnineral j-ndustry to the spatJ-al- organiza'l-ion of the country as a whole. Targets Ar B and C are designed to concentrate on deterrnining Lhe rol-e of minerals in national- development while the l-ast. three i-argets {D" E arrd F) focus on examj-rríng mineral-'s coni-rj-}ru'l-ion .l:o regional development"
l- " 5 Hethodo]-ogyr and Ðata Alt that awaits addressing at this point is the question of methodol-ogy " A range of methodologies wi1-t be pursued i-rr order to examine {:he aforesaid hypothesis and. several aïe the su}rject. of comprehensive application" ft is a basic charact.erist,ic of social science that isomorphism, or the existence of simple, one-to-one causal relationships, is rare" By default" then" r am forced into 22 an investigation of a series of causally-related variables. Such an examinatíon may be made more rigorous and less time-consuming if the explanatory variables can be considered simultaneously" rather than in a stepwise, "one-after-another" manneï. It is to accomplish this aim that accounts for my interest in mult,ivariate techniques. I have elected two for extensive use: factor analysis and cluster analysis. Hoú7ever, this is not to say that factor analysis (FA) and cluster analysis (CA) are the sol-e or main methodologies geïmane to my research, merely that they are the two most appropriate for ordering the mass of data collected" The order ensuing from the application of these two techniques will stil-l- allow this study to use other methodologiesn especially the input-output approach (r-o) and regression analysis " A methodologícal framework f or relat.i-ng mirreral- industry and reEional development can be listed as foll-ows: (a) apply I-O to exan'line rnining-based diversification and the perf orrnarrce of mineral industry in tocal_ economies; (b) use ïegïession analysis 'l-o l-est the imgraci-s of mineral- industry on regrional econornic welt-being.; and ( c ) apply FAICA to ascert.ain the j-ndependent. cont.rj-bution of mineral- industry to socio-economic Arowth and 't-he imgracl-s on ttre change patterns of, the national centre-periphery structure. The data for this study have been drawn mainly from Chinars official sources" although some of these have been compiled by other investigators, for example, the world Bank" The china Statistics Yearbook, the China Urban Statistics yearbook, and the 23 China Industries Statistics Yearbook are relied on heavily. Because China, the object of this study, is a large country with a territory of 9.6 million km2 and a population of more than l.l billion people and because its modern development covers a period of more than forty yearsr âhy kind of survey and primary data collection on the subject of the relationship between mineral development and. regional growth will be a very time-and-money- consuming job" Those resources of time and money are well beyond the reach of this researcher. More importantly, the data so obtained are more reliable and less controversiat, and. these data vocer noL onl-y the whole invest,ígation period but al-so both the national and regional J-eveJ-s" l-"6 Thesis trganization The subject matter of this thesis i-s orEanized into eight chapters " Chapter II addresses the target A by traci-ng the changing rel-a'l-ionshi¡: beLween indus't-rial devel-o¡rment and mirreral- consumption. Chapl-er III deal-s úrith tarEet B by presentínE the generaJ, pattern of mineral supply and. the d.eveloprnent of the mineral industry. Chapter IV inquires into target C try eval-uating the contrj-bution of the mineral industry 1-o China's foreign trade. All- three chapters are designed. to concentrate on examíning the relationship between economic growth and mineral development at the national ]-eve]. so that a sound foundation can be laid for the remainder of the study, that wíth a regional focus. Chapter V and Chapter VI focus on estimating the contribution of mineral_ 24 production to local economies at different stages of industrial- development (targets D and. E). Incidenta1-1-y, T am alive to the fact that there is a negative side to mineral development--the external-ities most vividly expressed through environmental degradation--and I have touched upon the pollution issue as it comes to bear on the mineral industry. Nevertheless, the thrust of this thesis is concentrated on the positive impacts because these, and these alone, offer the promise of economic development which wil-J- permit China to fuJ-J-y address the externalities in due course. The I-O technique and regression analysis will be used for determining the multiplier and linkage effects of mineral industry and the relationship between regional economic well-being and mining activity. Chapter VII presents the most important part of this thesis. Applying FA, the significance of mineral industry in China's economic development in the past forty years is assessed. It is designed to confirm the hypothesized expectation that the mineral ind.ustry makes independent positive contributions to Chinats socio-economic development. Furthermore, it attempts to disentangle, by means of CA, the distínct effects of mineral processing, coal and oil extraction on various parts of the country, ul-timatel-y impinging on the nature of the core-periphery structure. As can be elicited from Figure 1-5, the analytical resuJ.ts d.eal-t with in this chapter influence the conclusions (Chapter VrIr) that arise from the study. Long before any conclusion can be drawn, however, it is necessary to set the scene; and that is the purpose of the next chapter. l. Revierv lituratures and spell out the general hypothesis pertaining to the relationships betrveen mineral industry and regional development
2. Define the country as an empirical case study for testing the general hypothesis
3. Set up â target system for a detailed analysis
4. Determine a rânge of methodologies to estimate the results derived from the target system
5. Collect ancl order the data
Check the reasorìs and moclify the 6. Apply methodologies to explore the targets methodologies or the in the light of the general lrypothesis target system
7. Establish rvhether the results ofanalysis corroborate the general hy¡rothesis
Are ilrodifications rvarranted ? 8. Drarv overall conclusions
Reject the general hypothesis
Figure 1-5 A Logical Framework for The Study 26 CEAPTER TI
ECONOMIC DEVELOPMEI{T AIiID THE DE}ÍAND FOR MINERAT ì1TATERIAI,S
2.L Introduction
rt is undoubtedly the case that natural resouïces can be considered as the key to development and the foundation upon which any society is built. But the economy's dependence on the exp]-oitation of mineral Tesouïces is not a constant, it is a function of its stage in the pïocess of economic development in general and industrial-ization in particular. Chapter I was at pains to argue this point, especially with respect to the transition from industrializing to fully-industrialized economies. rn the light of the discussion introduced there it is permissible to maintain that mineral consumption is vitally important at the earry stage of industrialization and becomes pïogïessively less critical as the industrial system ad.vances. Although the interest in mineral consumption in the world, particularly in the developing countries, has beén awakened recent,ly, there is very little known either about how consumption has grown or about what causes it t.o gïor,ü (Tilton, 1990 ) . The purpose of this chapter is to scrutinize the actual demand trend Ín China in order to corroborate the proposition that heightened minera1. consumption is a critical factor shaping the early stage of industrialization. The analyses conducted herein are intended to establish the close relationship between the development of the manufacturing sector and the growth of mineral demands in China during the past forty yeaïs. The intent is also to show how important development policies have been in determining 27 the path of national economic growth. The findings should shed light on the sensitivity of structural transformation at the national level to the intensity of mineral consumption. overall, this chapter addresses the first target specified in the last chapter.
2.2 Ideo]-ogica]- Grounds for Economis Development First in Britain, then in a few regions of North-west Euïope and North-eastern America, a structura]- transformation of the economy' seen in perspective as having been in preparation for centuries, such a change shifted the balance of productive activity from agriculture to manufacturing industry and opened up boundless possibilities for increasing the productivity of human labour. This process' best described as industria]-ization, brought into existence those forms of the labour pïocess and styles of living distinguishing the modern world from the past. A rapid widespread adoption of machine production changed the traditional ways of Man's life, particularly the usage of natural resources. Mineral resources replaced plantat.ion and animal resources as a major input factor in economic growth. In pïactical terms' the amount of nearly every mineral resouïce worth mentioning used before that time vtras negligible in comparison with today/s consumption. The Industrial Revolution brought mineral ïesouïces into a neI,tr prominence of social production in terms of both the variety and the volume of minerals consumed.. The continued growth of industry, fed both by a growing world population and rising 28 standards of living, resulted in eveï greater demands for the earthts resources to feed, warm, house, and accommodate humankind. rn the period from L770 until 1900, when world population
approximately doubled, mineral production grer^r tenfold. From 1900 until L970, when world population increased about 2.3 times, mineral production increased twelveford (craig, vanghun, and Skinner, L988).
Since the Second Wor1d hlar, industrializatÍon has been generally sought by the newly-developing countries as the means to raise living standards and to ensure national independence. Vüidely publicized tables of income leve].s of the countries of the world leave no doubt that incomes aïe generally higher the greater is the contribution made by manufacturing industry. Countries which have little or no industry are almost invariably poor. The lesson is plain and simple: to oveïcome poverty and economic backwardness a country must industrialize.
rt has become the declared policy of the governments of ne1nr states, rarge and small, formed from the oJ-d colonial empires, to embark upon a programme of industrialization (explicit industriat policy). Conscious attempt.s have been made to follow models already in existence, as well as to develop neT^r ones appropriate f or particular areas or types of country. rndustrialization has, without doubt, become a global process and, atthough it proceeds very unevenly/ a neT¡r surge has been taking place. Even where it has scarcely begun it has been adopted as an article of faith, especially by the new governing elites hoping to consolidate their 29 national independence, emulate the advanced countries and raise income levels. where does china enter into this scheme of things? rn contrast with Japan and the "west", the necessity of industrialization was not fully accepted by the ging government (L644-1911) until china was defeated by,lapan in the war of Lgg4- 95. The period from the collapse of the eing dynasty (rgtl) until 1949 was turbulent, with "warrord." goveïnments, military struggle against the chinese communist Party, the Anti-irapanese waï and the L946-49 civil v"Iar. These disturbing conditions greatly handicapped economic developments in China. overall output growth was extremely slow, with g-ross national product (GNp) peï peïson estimated very roughly to have gro!ìIn by just 3.3 per cent per decade from 1g70 to
L952 (Shramy L979) . The establishment of the people's Republic of china (pRC) in L949 beqan to indicate that china at J-ast had emerged from her age of famines, although some terrible conditions persisted afterwards, such as the mutual hostility between china and the west during and after.The Korean war ( 1950-r953 ) , the Great Leap Foïrnraïd ( 195g-59 ) , the Sino-Soviet antagronism (the 1960s), and the Great Cultural Revolution (L966-L9761. AI]- these events hindered China,s road to development. The post-Lg49 giovernment set itself the task of modernizing china and pïogïess in ind.ustrialization üras regarded as a key means by which this hras to be done. rndustry, especially heavy or producer sectors / T,üas to be the leading thrust in this effort. rf one compaïes china's present industrial structure and level of productivit'y with the state of the chinese economy at the 30 outset of such transformation some forty yeaïs âgo, the progress in industrialization is undeniable. The Chinese themselves have maintained their high rate of economic arowth, particularly in industrial production, mostly as a consequence of the applicatÍon of the law of the priority growth of the producer goods sector (department I). In Book II of CapitaT, Karl Maïx analyses the processes of the simple and expand.ed reproduction of capital by attempting to show the mechanism by which capital consumed. during production is replaced. He divided the gross social product (in Chinese: shehui zongchanzhil into the gross social- product of d.epartment I (means of prod.uction) and the gross social product of department rI (means of consumpLion¡. From this analysis he deduces functional relationships that must occuï for the pïocess to be activated. His conclusion is that department r must gïoür moïe rapidly than department rr. rn other words, his scheme invokes a mode of extensive economic growth which is reliant on the formation of a basic economic infrastructure vital to development. This model was adopt.ed by the former USSR and. the procedure attaching priority growth to department I I/ìras erected by Stalin into an economic law imposed on former Soviet planners--and later on those of other socialist countries lpairault, lgSg) . The law of the priority growth of the producer goods sector (department r) was initially adopted by the Chinese goveïnment in its First Five-Year Plan (L952-L957') | and. came to dominate Chinese economic development right through to the 19B0s. rn practicar 31
Table 2-1 Key Economic Indicators, China ( output and. incone data a].]- at comparable prices) Average annual ÇÏoI^7-th rate ( o-ol 1953 - 1990 Total- social product (gïoss material. product) 8.7 Gross value of agricultural output 3.7 Gross value of industrial output 11.6 Heavy industry L2.7 Light industry LO.7 National income (net material product) 6.7 AgricuJ-ture 3.0 fndustry 11.0 Construction 7.8 Transport 7.6 Commerce 5.2 Popu1.ation 2.L Source: China's Statistics Buïeau China's Statistics yearbook, 1991.
TabLe 2-2 rnternationar comparison of Growth Rates (e.)
Average annual rate of increase l_n GDP Industry GDP per capita Country 1965-80 1980-90 1965-69 19180-9g L965-1990 China 6.8 9.5 10.0 12 .5 5.8 India 3.6 5.3 4.2 6.6 1.9 Indonesia 7.0 5.5 11. 9 5.6 4.5 Bangladesh L.7 4.3 1.5 4.9 0.7 Nigeria 6.0 L.4 13.1 -L.2 0.1 Brazi]- 9.0 2.7 10.1 2.L 3.3 Japan 6.4 4.L 7.L 4.L U. S.A. 2.7 3.4 L.7 :u L.7 source: world bank, vrr!¡rld Development Report, lg8g and 1990. * GPP roughly ** equals to Gross Sociat the size of population for each country 1in'rndonesia ñrirrions) in mid-1990: china (1137.0); rndia (B49.sJ; (íle.z); Bangradesh (L06.7); Nigeria (rr5.5); BrazrL (150.a); Japan' (L23 .5) ¡ and the U. S.A. ( 250 .0 ) . 32 terms' it involved the formulation of an overarching development strategy. That strategy was 1and, for the most part, persists in being) mainly drawn up according to the "ratchet principle". In other words, after postulating growth rates and taking into account a number of hierarchies (before the 1980s, iron and steel, Ì^ras always accorded the top priority, fol-lowed. by non-ferrous metal products, crude oil and coal; then, agricultural and manufacturing goods¡' it. simultaneously derives final output and the material outlays of the various sectors of t'he economy. The logic of this procedure is to maximize output in order to maximize final consumption (of producer goods in the first instance, and, then, of consumer goods), and, therefore, leads to rational choices in resource allocation. A first logical consequence of assigning top priority to the law of the department I growth is that Gross Social Value Output (GSVO) trl gror^rs faster than National rncome (Nr) [2], as shovm in Tabre 2-L, where, for the period 1953-1990, Lhe GSVO grïerlr at an annual average rate of 8.7 per cent as against the 6.7 peï cent applying f or Nr. The growth rate of net material product T^ras inferior to the growth of GSVO because of the increasing amount of material input used to produce a unit of output: a circumstance arising largely from such pooï initial conditions as the want of infrastructure facilities and suitable technical know-how and personnel on the one hand, and the rapid spread of rural industrialization d.uring the period of the Great Lead Forward and the Great Cultural Revolution on the other. But, even so, a growth 33 Tate of more than 6 per cent per annum during the period in question was a strong performance compared both with China's past and with what T¡ras occurring in most developing countries. World Bank estimates of the growL,h rates of different countries aïe given in Table 2-2 for the sake of comparison (with the exception of Bangladesh, arapan and Nigeria, only countries with veïy large populations are incruded in the table). rn the period of 1965-90, china's average annual rate of growth in GDp rnïas 6.9 peï cent, a relatively impressive figure and. one only just lower than those of Brazil and Indonesia. A second logical consequence of the J-aw is the increase in the capital-labour ratio (the organic composition of capital in Marxist terminology). rn China this ratio appeaïs to have doubled between
L957 and 1990 (see Table 2-3). This evolution is quite normal in a country which emphasizes capital. investment. The sectors where capital intensity is above average aïe precisely those composingT department r. rn other words, the raw of the priority growth imposes a disproportionable requirement for factor inputs, especially capital input. In fact, this law leaves Chinese planners wiLh no choice but. to puïsue a policy of high rates of accumulation. They accomplish this by, first, maintaining pressuïe on consumption. The rate of accumulation , for example, hras on average 33.4 per cent of National fncome during the First-FÍve year Plan. secondly, they achieve it by the granting of higher interest rates for longer-term deposits. rn 1983, for instance, interest rates varied from 2.9 per cent a year for immediate deposit.s to 34 Table 2-3 Gross Socj-al Val-ue Output, tilational ïncome and Capital-- Labour Ratio (bi1-lion 1980 yuan)
1953 L957 1965 L975 1980 1990 GSVO (c+v+m, L24.1 160.6 269.5 380.0 Nr (v+n) 70.9 853.4 3799.6 Material 90.8 138.7 250.3 368.8 L442.9 outtays (c) 53.2 69.8 130.8 L2g.7 484.6 2356.7 Remuneration fund ( rz) 55.9 70.2 gB.2 L62.L c/v*m 0.75 253.1 944 .4 c/v (capital-Iabour 0.76 O.g4 1.15 1.30 1.63 ratio ) 0. 89 0 fnvestment .99 1.33 L.77 1.90 2.50 ratio 23.L 24.9 27 .L 33.9 31.5 34.7 GSVo=Gross sociar value output. Nr=Nationar m=net additionat product. rncome. source: china's statistics Buïeau, statistics yearbook China. 1991,
L0.4 per cent a year for eight-year deposits. Thirdty, they puïsue the goal by modifying the ratio of so-carred productive and. consumptive or unproductive investments (the total investment in the producer goods is divided by that in the consumeï goods). The distribution between these two types of investment rüas kept at. 80/20 before the 1980s according to china's statistics Buïeau.
2.3 Changes Inherent in Economic Structures Many countries have displayed a general pattern of change in economic structure as their economies modernized and grew. First, a long-term pattern of increasing per capita output has generalry been accompanied by a continuous decline in the proportion of GNp supplied by agricurtural and related primary industries. second., shifts in the industrial structure have required a significant rise in capital formation. Third, within modern Índustry, a remarkable change has arso occurred. in the division between consumeï goods and 35 producer good.s. over the past forty years, the structure of the Chinese economy has undergione d.ramatic changes in terms of sectoral structure' the relationships between investment and consumption, and the relationships between industrial. structure and the composition of foreign trade. Structural. changes in national- product. Tfre most distinctive feature of mod.ern economic development is the shift of product and labour force from agriculture into manufactuïing. In pre-Vtorld War Ir yeaïs, agriculture supplied the overwhelming share of China's national product. In L952, agriculture accounted for 57.7 per cent of NI, leaving the industry sector to account for only 23.L per cent. Between 1952 and 1ggo, the share of agriculture products in NI dropped 23 points, whiJ-e that pertaining to industry Tose more than 28 points. In terms of the st'atistical data furnished by the world Bank, the share of agriculture in GDp dropped some 9 points between L965 and 1990, while t.hat of industry rose 7 per cenL. Also, the structure of the Chinese labour'force shifted dramatically during the same period, with the share of agriculture falling from 83 to 60 peï cenL, the share of industry (secondary production¡ rising almost three-fold (from 7.4 to 2L.41 and that of services more than doubling (from 9.1 to 19.6). rn contrast, ag'riculture's share in the low-income countries lwith per capita nationar income of less than usg420 in 1990 ) in general dropped only 5 points while industry's share ïose at an even slower pace (see Table 2-4). Structural- change in National- Income. A significant rise in 36
Table 2-4 Economic and Production Structure Change in China (e.)
Sector L952 1965 L97 0 L97 5 t9B0 1990 Share in NI lnet cDP) China Agriculture 57.7 46.2 40 .4 37.8 36.0 34.7 Industry 23.I 40.2 45.L 50.5 53 .9 45.8 Services L9.2 t3 .6 L4.5 LL.7 10.1 19.5 Share in GDP China Agriculture 38.0 28 .4 Industry 35.0 54.7 Services 27 .0 L6.9 Low-income countries AgricuJ-ture 4L .0 31.0 fndustry 26.0 36.0 Services 32.0 35.0 Share in labour force China Agrículture 83.5 81.5 80.7 77.L 68.7 60.0 Industry 7.4 8.3 l0 .1 t3 .3 18.3 2L.4 Services 9.1 9.9 9.2 9.6 13 .0 18.6 Low-income countries Agricu1-ture 77.0 ( 1988 72.0 Industry 9.0 (r988 13 .0 Services L4.O ( 1988 15 .0 Source: l. Statistic Bureau of China, Statistic yearbook of China,199I. 2. World Bank, Vrlorld Deve]-opment Report 1992.
Table 2-5 composition of Aggregate Demand in china and Other Developing Countries, 1965 and 1990
Investment ( o-ol Domestic savings ( g"ì L965 1990 1965 1990
China 25 39 25 43 fndia IB 23 L6 20 BraziI 20 22 22 23 Japan 32 33 33 34 Developing countries L9 31 1B 28 Middle-income countries 2L 23 22 24 Industrial countries 23 22 24 22
Source: I¡Iorld Bank World Deve]-opment Report, . 37 the proportion of NI devoted. to capital formation is a prerequisite for modern economic development. The characteristic feature of China's pre-Vüorld Vlar II economy r¡ras stagnation in which capital formation was extremely low (cheng chu-yuan, L9g2). The rate of investment for the period 1931-1936 was only 7.s peï cent of Nr, based on L952 prices. To achieve rapid industrialization, the new chinese government placed great stress on promoting capital accumulation at the expense of private consumption, thus producing a radicar change in the end-use of the domestic product. According to Chinese statistical materials, private and public consumption accounted for more than 90 peï cent of NI in 1933. It dropped to 78.6 per cent in L952 and declined further to about 66 per cent in 1990. rn fact, the proportion of nat,ional income devoted. to capital formation in al-most aJ-1- phases of economic development in China rnras very high by international stand.ards. For many years China's investment. ratio was weJ-l. over 30 peï cent and in some periods even exceeded 40 per cent of the mat.erial national product. By r^ray of comparison, rndia's investment ratio , for example, stood at around 20 per cent in the years between the 1970s and the 1990s. The hi-gh share of saving in china is unique among low-income countries, well above the average for the middle-income countries, and matched only by Japan and the East European countries (world Bank, 1992, see also Tabre 2-s and Figure 2-L). fndustrial- structure change. Within China's industrial sector' there has been a significant change in the importance of producer goods relative to consumer goods in the composition of Foreign borrowing
/ ¿ ¿
China Typical large Typical large low-income country middle-income countrv
Figure 2-1 Composition of Aggregate Demand in China and Other Countries,lgg0 (Shar-e of GDp)
Source: World Bank (1992), World Development Report. 39 Table 2-6 Structural Change of Industria1- production in China ( e.) Sector l-949 L952 t965 L97 5 1980 1985 1990 The Tota]- 100.0 100.0 100.0 100.0 100.0 100. o 100.0 Light industry 73 .6 64.4 5L.2 44.I 47 Heavy industry .O 46.3 49.4 26.4 35.6 48.3 55.9 53 .0 53 .3 50.6 Metal.. Industry 1.8 5.9 LO.7 9.0 Power 8.6 8.0 10.4 industry 2.4 1.3 3.1 3.9 3.8 3.3 2.7 Coal industry 3.8 2.4 2.6 Petroleum 2.8 2.3 2.3 2.5 industry 0.5 3.2 5.6 5.1 4.5 5.0 Chemicals industry 1.5 4.8 L2.9 Machinery industrli 11.3 L2 .5 LL.2 L4.9 6.8 LI .4 22.3 27 .7 25.5 27 .0 24 .4 Building Mat. ind. 1.1 3.0 2.8 Timber 3.1 3.6 4.2 4.8 industry 6.9 6.5 2.9 2.0 L.7 1.6 1.6 Food proc. ind. 23 Textiles .6 24.L T2 .6 L2.0 11.3 11.5 L2.2 industry 36.9 27 .5 15.B L2.3 L4.7 15.3 L4.s Paper-making ind. 1.3 2.2 Other 1.8 1.3 1.3 1.3 2.L industries 13 .9 10.4 9.3 9.0 9.6 9.8 4.9 Sources: l. china's statistics Bureau (1991) china's statistics Yearbook, 1991. 2. Li Wen-yan (ed) (1990) rqdgstria]- Geoqraphy of -chiÐa' scÍence Press, Bmnese). Note:1. light indust.ry consists of fóodl È""tir"=r and other industries. papeï-making 2 - Heavy industry is equar to the department r or prod.ucer groods sector, which includes metai/ por/ìreï, coaL, petroleum, chemicar, machinery, builäing materiárs timber industries according to china's and Bureau statistics
output and in the roles of the steer, machine-building, and eneïgy industries - Before rg4gl consumer goods predominated in industrial production. Roughry 92 per cent of industrial capital in the 1g30s was invested in consumer-goods industries, and in 1933, gr per cent of the nation's gfïoss value of industrial output and 76 per cent of gross value-added had been created by the consumeï_goods industries' rn r936, textiles and food processing alone accounted for 63 per cent of the gïoss value and consumeï goods as a whore accounted for 80.4 per cent of the totar gïoss varue of chinars 40 industrial output- The differing rates of growth of light an¿ heavy industry materiarry altered china's industrial structure after L949 ' rn L949' colÌsumeï goods accounted for 73.4 peï cent of the total value of gross industriar output: a ratio in respect of heavy industry of about 3:1. rn 1990 the division was 49.4 per cent for consumer goods and 50.6 per cent for produceï goods. The change in industrial structure is even moïe striking when the rerative shares of the eleven major industries in various benchmark yeaïs aïe compared (see Tabre 2-6). The great loser has been the textiles industry, which dominated chinese industry for almost a century. rn L949 ' it accounted for 36.g per cent of the total gïoss industriar output value, but by 1990 its share had dropped to r4.s peï cent. The growth of the machine-buirding industry has been spectacular and has prayed a crucial rore in china,s industrialization. rn offj-cial statements, the ind.ustry is often referred to as the basis for technological transformation of the national economy and the pirrar of national defence. rn Lg4gl machinery accounted for onry 6.g peï cent of the nationrs gïoss industriar output value. since Lg52, hoTdeveï, the industïy has been given a high priority in deveropment prans, and by 1960, its rerative share in the totar gross industrial output varue had increased to L2 peï cenL. After reaching the peak of its development in the r970s (27 .7 per cent of the totar in t9 75) , the machine-building industryTs share dininished to 24.4 peï cent by 1990 owing mainry to changTes in the internationar poritical situation and the consequent large-scaIe introduction of equipment 4L and technology from abroad. Nevertheless, the great pïogïess in the machinery industry makes it one of the most dynamic branches of chinese manufacturing. compared with other industrial sectors, the annual growth rate of the machinery industry r¡ras L4 peï cent between 1953 and 1990; a better performance than total producer goods output (12.s peï cent) or industry as a whole (11.8 peï cent) . As one of the greatest contributors to china's industrial_ development, the expansion of the chemícals industry r,tïas mainly charged with promoting the interests of agricultuïe. Hor¡reveï, the domestic production of chemical ferti]-izer sras stirl not high enougth to satisfy d'omestic demand. There T¡reïe options available for improving the supply situation: firstly, to import artificial fertiu-zer; secondly, to import production plants for artificial fertilizer; thirdly, to buird large-scale plants without foreign participation; and fourthly, to set up a large number of small_ scale prants. with the third possibility rured ouL because of the backwardness of domestic technological and materiar bases, it was decided to emproy arr means availabre, though with differing emphases. At the beginning of the Forth Five-year pl_an period (L97L-75), china became the world's rargest buyer of artificiar fertilizer: almost half of all nitrates used hreïe imported.. rn 1971 chemical fertirizers imported into china amounted to some 6.5 million tonnes. The dramatic rise in worrd market prices forlowing the oil crisis of L973 red temporariry to a noticeabre decrine in imports; that is, they dropped to 4.6 mirlion tonnes in Lg76. rn 42 the next ten years they ïose again, now to oveï r0 nillion tonnes. At the same time, China elected to supply all its own needs through the importation of turn-key fertilizer factories. Since Lg73, for example, the Chinese government has invested moïe than 4 billion yuan to import 15 complete factory installations for ammonia production, with a capacity of 4.29 miJ-I-ion tonnes annualry. As a result, China became the world's third largest producer of chemical fertilizers in 1989 after the former USSR and the U.S.A. (United Nations, 1989). Structural changes in exports and imForts. In the process of industrialization and modernization, foreign trade can play divergent roles. rn some countries, it serves as a prime moveï such that the expansion of exports stimulates technological change and opens up new markets, leading to rapid economic growth. rn other countries, foreign trade becomes a balancing factor; imports seïve as a inray of breaking domestic supply bottrenecks, and the primary function of exports is to fj-nance imports. China falls into the second category.
In China's modernization, foreign trade has constituted a vital channel for introducing both equipment and neT,ü technology, provid.ing a major reason for persisting with trade expansion. Between L949 and, L979, foreign trade accounted for onry 5 to B per cent of GNP. rn recent years, the volume of China's international trad.e has expanded greatly, accounting for 3L.4 per cent. of GNp in 1990.
chinats composition of exports and imports is unusual when 43 compared hTith that of other developing countries. Unlike most other 1ow-income and lower-middle-income countries, Chinese exports consist mainly of manufactuïes, which accounted in 1990 for 74.4 per cent of the total of exports, compared with aveïages of 29 per cent and 3B per cent for other low-income and lower-middle-income countries- rn fact, China's manufactured goods export share was at the same leve1 as that of uppeï-middle-income countries, despite its large fuel and mineral exports. Hot/üeveï, a characteristic that china has in common with most low-income countries with respect to the composition of exports, is the high share appropriated by textiles (27 per cent in 1990). Taken as a whole, china/s exports are quite similar to those of rndia, which is also unusual among low-income countries in exporting moïe manufactuïes than primary products. The primary difference between the t'wo is that China exports a great deal more fuel and minerals than rnd.ia, and 1ess agricultural products.
rn L990, China/s imports T,.Ieïe Br.5 per cent manufactuïes and 18.5 per cent primary products, which is quite similar to the averages of other developing countries, although rather different from rndia and other large countries (see Table 2-71. rn 1990,37 per cent of rndia's imports consisted of primary products and 63 per cent r^rere made up of manufactuïes. The main ïeasons for this difference are that, first, while China ï^ras a net exporter of fuel, Indian was an importer with L7 peï cent of its imports consisting of oil and oil prod.ucts (1990) and, secondry, china became one of the worrd's largest buyers of machineïy and transport equipment 44 Table 2-7 The Commodity Composition of Internationa]. Trade in China and Other Countries, 1990 Low-income Lower-middle Upper-middle China fndia economies -income -income
siti f mercha I_Se e o-o of To Primary 26 27 47 62 45 Fuel, minerals 10 I 27 32 32 Other primary L6 L9 20 30 13
Manufactures 74 73 43 38 55 Texti].es 27 23 2L 9 9 Machinery L77 9 L7 20 Other 30 40 l_3 L2 26 omposition mercha CI of Total
Primary 31 37 29 29 32 Food 88 L2 11 10 fue]-s 2L7 9 10 13 Other 2I L2 B I 9 Manufactures 69 63 7L 7L 68 Machinery 4L 18 33 34 33 Other 28 45 38 37 35 source: world Bank, world Development Report 1992. after 1985 (31 per cent of its total import value in 1990), purchasing such items as Boeing aircraft, whereas rndia T¡ras much more restrained Ín its purchasing practices ( 1g per cent of its total import value i,'ras ascribed to machinery and transport equipment. in 1990).
2.4 Patterns of Capital fnvestment rn China the term "capital investment" refers specifically to investment in fixed assets, comprising construction and investment in replacement and renewal. Such investment is the starting point for growth in china's economy, directry affecting not only the national economy' science and technorogy, but also both long-term 45 and short-term social development. where there is public oumership dominating the social production, investment is crucial to planning, and. consequently is a critical factor in the development of the national economy relative to China's huge population and its vast end.or,rrment of natura]- resouïces. Tab1e 2-8 presents the general patterns of gïoss domestic investment during the past forty yeaïs. First, setting aside the adjustmezt period (1963-65) and the following Third Five-year p1an, the two most unsettling periods in the whole capital investment's pattern of investment during the past 40 yeaïs, the rate of domestic investment increased steadily from the First Five-year Pran period up to the most recent yeaïs (see Tabre 2-9). The rate durÍng the Fourth Five-yeaï plan and af ter T^ras very high by comparison with those of developing countries (see Fig. 2-L). second., industry is always in the forefront of the staters investment, and its share neveï feJ-J- below 50 per cent before the 1980s- Following a decline between 1981 and 1985, the share-¡of industry began creeping up again and reached 46.6 peï cent during the seventh Five-Year Plan period. This r,tras occasioned. by the severe energy shortage of 19g0-91. paradoxically, the share of investment in the service sector declined. over an extended period. Therefore, in response to the growing imbalances between industry and services, Lhe share of investment in services increased sharply in the 1980s. To ameliorate the urban employment problem, for example, the state removed many of the restrictions on the urban service sector, and., as a result, investment in restauïants, an¿ 46 Table 2-B The Structure of The Centra]- Government's fnvestnent in Fixed Assets in China, 1953-90
The tota]- The percentage of sector ( eo) (biJ-J-ion yuan) Agricu1-ture Industry Services* China lFYP ( 19s3 -s7 6L.2 6.8 52.9 40.3 2FYP ( 1958-62 130.7 10 .4 7 L.5 18 .1 Adj. (L963 -65 50.0 L4.9 54.9 30.2 3FYP (L966-7 O r20.9 8.9 57 .6 33.5 4FYP (Le7 L-7 5 227.6 7.6 56.6 35.8 5FYP L97 6-80 318.6 7.7 54.0 38.3 6FYP 1981-85 533.1 3.2 42.L s4.7 TFYP t9B6-90 L249.3 2.4 46.6 51.5 Tota]- ( 19s3 -1990 ) 269L.4 4.4 49.4 46.2 International comparison of national investment in fixed assets u.s.A. 1960 3.8 11. 6 84.6 L97 8 3.6 L3.2 83.2 Japan 1960 5.5 34.5 60.0 L97 6 6.3 15.6 88.1 India 1965 5.2 23.7 72.L L97 6 3.5 20.0 76.5 * servj-ce sector in china includes construction, transport, post and telecommunications, conmerce,' trad.e, education, public health and wel-fare' government administration, urban construction and. others. source: china's statistics Bureau, china's statistics yearbook L990, Statistics of Investment in the Fixed Assets in China, 1953-85. the businesses of trad.e and. personal services, increased rapidly. The state also began putting large amounts of investment into housing. In the 1960s only 5 per cent of al.l capital-consLruction investment went int.o residential buildings. In the 1980s this figure had risen to 21 per cent. Like many other countries, agriculture received the smallest share of the state investment and its share declined steadily from the earlY L960s to stabilize at a very J.ow level by 1990. After the economic reforms in China's rural areas, initially introduced in 47
Table 2-9 Structural Changes in Industrial Investment, China (e.)
lFYP 2FYP 63-65 3FYP 4FYP 5FYP 6EYP TFYP Tota]- 100.0 100. o 100.0 100.0 100.0 100.0 100.0 100.0 J-ight 15.0 10.5 7 .8 7.9 10.5 L2.7 L5 .2 L4.5 Heavy 85.0 89.5 92.2 92.L 89.5 87.3 84.3 86.5 Industrial branches Metal. 18.6 23.2 16.1 L8.2 L7 .7 L5 .4 L3.7 9.2 Power 11.9 L2.2 10.5 L2.7 L3.2 L7 .8 2L.2 32 .2 CoaI 11.9 11.9 L2.0 8.6 9.3 11.1 13.1 9.2 Petroleum 4.8 3.4 7.8 7.2 9.1 LO.7 9.4 9.9 Chemicals 5.4 7 .6 LL.2 11.5 9.8 13 .6 10.3 L4.6 Machinery L5.4 16.0 11. 6 L3.7 22.2 L4 .5 10.0 7.6 Timber 2.5 2.4 6.7 2.9 2.6 1.8 2 .2 1.1 Building- materia]- 2.5 3.3 3.4 2.7 3.1 3.8 5 .1 4.2 Food 4.L 3.2 r.9 1.8 L.6 2.3 4.L 3.7 Texti]-e 6.4 2.7 3.8 2.5 3.3 5.9 6.3 2.8 Paper- making 1.5 1.3 0.6 1.3 0.8 0.9 0.7 0.8 Others 15.0 L2 .8 L4 .4 L6.9 7.3 2.2 3 .9 4.7 Sources: see Table 2-8.
L979, the state reduced its financial support to agriculture in the 1980s and retained only a limited influence on agricultural development through a subsidiary poU_cy of borstering infrastructure construction in rural aïeas such as larqe irrigation projects. The metallurgical industry r¡ras long identified as the "keylink" of modern industry and received the lionTs share of capital investment. Between L952 and 1985, the fixed investment allocated to the metarlurgical industry added up to 15. g peï cent of the total industry investment and r^ras more than three times that of the textiles industry and other light industries. During the Seventh Five-Year Plan period, however, the share receded to second place 4B after the po'^rer industry, due mainly to the worsening of industriarization bottrenecks, especially as reflected in a widespread shortage of electric por¡reï. From L949 to the mid-1980s, China pursued an inconsistent policy with respect to the development of the por^reï industry. Significant under-investment in the 1970s caused serious por^reï shortages into the 1980s. Although china's hydroelectric por^reï potential is the world's largest and the pornreï capacity of the country was the forth largest in 1989, recent estimates showed that demand exceeded supply by about 40 biJ-lion kilowatt-hours peï yeaï. Because of power shortages, factories and mines routinely operated at 70- to 80- per cent capacity, and in some cases factories only operated for 3 or 4 days a week. Whole sections of cities $reïe frequently blacked-out for hours. The government began to acknowledge the seriousness of the power shortage in LgTg and took positive steps, including importing l0/000 megawatts of thermal power-plant capacity to serve the East's large population centres. rt also launched a naLionwide campaign to create an addj-tional 5,000 megawatts of e].ectric-poweï capacity in 1985. under the Seventh Five-Year Plan (1985-90), L22.5 billion yuan oï one-third of the state's investment poured into the industry to add nearly 28t500 megawatts of capacity, a 33 peï cent increase oveï all previous five-year p1ans.
2.5 Consumption of Mineral- Material-s As mentioned above, the development policy stressing producer 49 goods first enabled China to achieve remarkable success in enbedding heavy industry; that is to sây, in the aïea upon which most of the development effort was concentrated. Between 1952 and 1990 the output of industry in total ïose 52 times, but heavy industry gTer¡r by a factor of 75 as against light industry's factor of 40 (Table 2-21. undoubtedly, the resultant rapid growth in the industrial economy, especialry in heavy industry, put seveïe pressure on rar^r mineral materials and energy supplies, and demand. for all types of industrial minerals has expanded at an unprecedented pace. There are two activities, industrial production and major construction, which require substantial material and energy inputs. For every 100 mi].]-ion yuan of capital investment in china in 1990, for example, there ar.ose a coïïesponding need for L2t852 tonnes of cement and.21863 tonnes of steer products. For every 100 ni1lion yuan of industrial- output value, a corollary of 45t200 tonnes of coal equivalent of energy input r^ras ïequired, and heavy industry required about 2.8 times moïe than light industry in L990. According to the Statistics Bureau, China consumed 1.9 million Lonnes of ordinary steel- products in 1953, but the total consumption reached 50.9 mil]-ion tonnes in 1990; an increase of nearly 27 -foLd'. The situations for cement. and crude oil aïe even more striking. In 1990, some 190.4 nil]-Íon tonnes of cement and ll5 million tonnes of crude oir rnrere used., as against 3 .6 milrion tonnes and 1.4 million tonnes in 1953 respectively. rt has long been recognized. that for the majority of countries 50 Table 2-Lo Elasticities of Key Metars in Reration to cDp per Capita in the hlorld Commodity WorJ-d Developing China ,Tapan countries USA Aluminum (L962-94 2.00 2.08 L .04 2.I0 1.91 Copper (L962-84 0.74 1.85 L.L7 1.14 0.70 stee]- (L962-82 0.96 Total 2.03 1. B3 1.16 0 .62 Nonferrous L962-84) 1.05 1.63 0.97 1.31 1.05 Source:1. ilack Faucett Associates (1986). 2. china's statistics Buïeau, chinars statistics yearbook, L99L.
Tabre z-LL Energy EJ-asticities in Relation to GDp per capita Vrlor]-d in the
Energy consumption GNP EIasti- (kilograms of growth growth cities oi]- equivalent) rate* raLe* L965 1990 (e")(t) (e"l (2) (L) / (2) Low-income countries L24 339 4.L 2.9 L.4L China L7B 598 India 5.0 5.8 0. B6 100 23L 3.4 1.9 L.7 9 Middle-income countries 7L2 Lt357 2.6 2.2 1.18 Lor,irer-midd]-e-income 597 Lt025 2.2 1.5 L.47 Upper-middle-income BB4 1,818 High-income 2.L 2.8 0.75 countries 3 t566 5,159 1.5 2.4 0.63 Japan L,474 3t563 2.5 4.L 0.61 u. s.A. 6,536 7 t822 0.5 L.7 0.29 World L.1LA Lt567 L.4 r.5 0.93 *=annual- growth rate. Source: World bank World t. . 51 there is a correlation between GDP or Nf on the one hand and energy and key minerals consumption on the other lMalenbaum, r97B). A common Inray to examine the relationship is the elasticity of consumption; an indicator estimated by comparing the growth rate of consumption per capita for a number of key metals and energy materials with that of GDP or Nr per capita. The elasticity relationship is illustrated as follows: if the eJ-asticity of a key metal is L.3, then for each one per cent increase in GDp oï Nr per capita, there is an increase of 1.3 per cent in the metal consumption per capita. Table 2-L0 and Table 2-LL show the elasticities for some key materials and energy materials both for the world and for China. It is evident that. the key metals and energy elasticities for China are quite moderate in contrast with those of other developing countries and the world as a whole, but, in the case of all nonferrous metal-s, are considerably lower than developed countries. China/s situation could be the out.come of a higher raLe of economic development as discussed earlier (see Table 2-2 and Table 2-LLl, together wj-th a lower rate of poputation growth (2.2 percent, between L965 and. 1980, and 1.4 percent between 1980 and 1990, and also see Figures 2-2 and 2-3\. The elasticities of key metals and energy materials ín relation to GDP for a country do not indicate the degree to which a count.ryTs energy and mineral materials consumptions are moïe or less efficient than the norm. In order to measure the efficiencies of energy and mineral consumptions in china, it is appropriate to introduce the so-called "intensity of use (rU) of materials" device 1 000 900 I 800
700 t
600 o I 500 (€ 400 t V T 300 ¿vu I 100
0 r-!-*-r-r-!-f=?-;-r**t--f -l-llî;-î-] Ë Ë5 5B ËÊEE ËËË8 ËBËBSEË ËË sE 5Ë 8E ä8 ËË s8 BEa ã (year, standard coal equivalent for energy)
Energy coa-l -Ð- -ô-
f igure 2'2Bnergy consumption Trends in china. 1953-90 (kilogram/per capita)
O\æO¡\) A o\ æ 1953 1954 1955 oe 1956 Fl o 1957 b¿ 1958 I (, 1959 ,l o 1960 1961 1962
(D 1963 ã 1964 1965 rà7 1966 rÞã 1967 I 968 çh 1969 1970
t97 1 at) o Þ t972 1973 t974 1975 ã'l 1976 o 1977 v) 1978 r979 1980
r 98l 1982
1983 (rl\o t984 (, 1985 \oI 1986 1987
1988 1989 1990 54
t3l. This permits the analyst to deduce how much eneïgy and mineral materials were used per unit of economic performance. For comparative purposes, Figures 2-4 and 2-5 give an overview of the intensity of primary eneïgy and iron oïe consumptions by selected countries during the past 40 yeaïs, and both show that there is evidence of a changing pattern of ru of mÍneral materials associated with per capita income levels. rn 1950, the economy of the United States I',ras already in its mature stage with nearly us$3'500 of GDP per capita (in L}TL price), and undoubtedry, the trend of ru for the country exhibited d.ecline during the entire period of the past forty yeaïs. rn contrast, Japan initially underwent a difficult period of economic ïecovery after v,Ior1d war ïr. rts economy improved, hornrever, by the mid-r950s (in r960 Japan's GDp per capita reached a point of moïe than us$1,000 against us$500 in 1950, in LTTL prices. From the later 1950s, the growth pattern of ru of primaïy eneïgy and iron ore for Japan began to diminish quickly, particularly after the oit crisis in the early part of the 1970s. unlike both the united states and arapan, material inputs in the industrialization of China and India displayed a rísing trend and dominated the sources of economic growth until recently. Technical factors, usually indicated through the capital-labour ratio (see Table 2-3), started to increase ín importance in the total factor productivity when GDp per capita for both countries reached around usg300 (in L}TL price), with the effect that the rising trend in ru turned downwards. China and rndia are the two largest developing countries in the (o/o)
600 -
'oo *'] l
-"J-'"1 ',7 0+
#rr.r. ------{- Ju1:or -- India + China
-u.ò. Figure 2-4.lrJ of Primary Energy by selected countries, 1950-90 1200
1000
800
600
ß0
200
0
+U.S. +Japan +India +China
Figure 2'5IU of Iron ore by serected countries, l9s0-90 57 r¡rorld and share many characteristics in modernizing their economies. For example, industrialization in both countries started when they became fully i-ndependent nations after world War rr. Governments played, and continue t.o play, a veïy important rore in the national economies and, what is more, industrial development in both countries followed the Soviet-type centrally-planned model before 1980. Yet some fundamental diffeïences occuï between them, not least the fact that a more aggressive "prod.ucer goods first policy" in china makes that country quite different from rndia in the growth pattern of rU of material-s. The iron ore intensity in china, for example, had an annuar increase rate of zL.L per cent between L965 and L979; a far cry from the 5.1 peï cent, obtaining for India. rn the 1980s China experienced marked declines in the intensities for all mineral materials, mainly on account of the large-scale introductÍon of foreign technology and. equipment. However' this development did not. alter the situation whereby the energy and material intensities in the Chinese economy st.ill regist'ered higher leve.ls than those record.ed by other countries, particularly in the industrial sector. A striking example ís the energfy consumption per unit of output varue. consumption of commercial primary energy per unit GDP in China is well above that of any of the other major developing countries reviewed (see Table 2-LZ). rndeed, the total of commercial energy intensities in China T^ras considerably higher than the world average of 0.54, more than half as much again as rndia's L.22, and seven times higher than 58 Table 2-L2 rnternational comparisons of Energy consunptÍon Total commercial enercry Residential use Share of lkilograms coar equi@ r"a""irv (1990¡* (1980¡** (e.) Developing countries China 1. B6 L.T4 6B ( 1e90 India L.22 0.83 ) Developed countries 26 (1980) ,fapan 0.22 0.13 4L (1980) U. S.A. 0.53 0.35 3s (1e80) I{or].d 0.54 * Sources: World Bankr . * * üiorld Bank (1985)/ çhina, lonq-ierrn Oevelopment fssue and Options. China's statistics Bureau, china's statistics yearbook, 1991.
Tabl-e 2-L3 China: Energy Consumption per Tonne produced in Smalt and f,arge pJ-ants, l9g1
Energy consumption* SmaJ-J- pJ-ant share IndustrÍa1 Smal-l. pJ-ant Large plant of total- production
Crude stee]- L .57 r.20 20o'o Synthetic ammonia 3.00 L.45 45o'o Cement 0.18 0.12 u!"" Plate glass 0. 87 0.30 * tonnes of st.andard coal equival-ent source: The T¡Iorld Bank, 1985 china: Long-term Development rssues and options, washington - . c .r_i. s-.a.
/ ,rapan s 0 .22. china' s steel consumption of r27 .30 tonnes peï million us dollars of GDP in 1981 was about 30 per cent higher than rndia's, about 10 per cent higher than South Koïea's and twice as high as Japan/s (World Bank, I9S5). one factor contributing to china's high level of key minerar materials and energy uses relative to GDp is a high share of industrial output in GDP. i¡'Ihile industry typically accounts f or 59 little more than one-third of GDP in other low-income countries, this sector currently accounts for more than one-half of GDp in China--a share that suïpasses aveïage ]-evels in both middle-income and industrialized economies (recal-J- Table 2_4). Another important contributing factor in China's eneïgy use, compared with mosL other developing countries, is the existence of substantial winter-heating requirements in many parts of the country. Economic deveropment of a row-income country typically brings an increase in the share of industrial output in GDp, which tends to increase energy intensities. At the same time, residential/commercial sector consumption tends to rise more slowly than GDP. rn china, horareveï, both the exceptionarly high share of industrial output and the high aggregate demand for basic household energy requiremenLs relative to GDp serve to increase eneïgy intensities.
Last, but not least, totar key materials and energ-y consumption per unit of gross output value in the industrial sector is also exceptionally high compared with most other countries. While the energ-y intensity of industrial production, for instance, is similar to that in rndia, it is oveï twice the ].evels of South Korea and the U.S.A., almost three times the level in Brazil, an¿ oveï three times the level in Japan (hlorrd Bank, l9B5). At an aggïegate level, the most important reasons underlying high ]-evels of minerals and energy consumption in Chinese industries are the preponderance of small-scale enterprises in materials- and energy-intensive industries' the use of obsolescent technology, and the persistence Pig iron flows (unit:'000 tonnes)
Figure 2-6 sources of Pig rron for the steel-Making rndustry in Beijing-Tianjin-Tangshan Region of China Source: Liu Da-dao (1989) Industrial Location in China: Theories and practices (in Chinese). 61 of inefficient operating practices in industrial production. As Table 2-L3 shows, unit eneïgy consumption in these small-scale plants tends to be welr above levels in large plants, owingr primarily both to the inability to realize economies of scale and to the use of less-ad.vanced technology. In the 1980s, boiler fuel for industry and space heatingf accounted for moïe than 35 per cent of total final commercial fuel consumption. Nearly 2OO t000 boilers are currently used in china, of which some 70 peï cent have production capacities of less than two tonnes per hour. According to Chinese estimates, averagfe thermal. efficiencies are roughly 55 per cent, compared with averages of some 70 peï cent abroad. The dominance of coal helps explain this difference, but the preponderance of small unit sizes, technology d.ating to the I930s and 1940s, and lack of mechanization arr contribute to high consumption rates in China. rnefficient operating practices or irrational locations also contribute to the high eneïgy and material intensity in industrial production. A typicar example is the suppry of pig iron for steel- making industry in the Beijing-Tianjin-Tangshan region, one of the rargest steel-making industrial bases in china. Each yeaï, some r.6 million tonnes of pig iron and 0.2 million tonnes of coke have to be transported from cities in Northern and Northeastern China, or even from central china, to Tianjin and Tangshan for steel production (see Figure 2-61. unfortunately, this is not the only case of excessive material hauls. According to one study, about 5 million tonnes of pig iron, or 10-12 per cent of the total pig iron 62 used each year, are moved between regions in hauls of more than 900 kilometres because of the J-ack of integration in Chinese steel production (Liu Da-dao, L9B9). such movement results not only in greater cost of pig iron transport but also imposes larger eneïgy requirements (and coke inputs¡ for reheating pig iron. rt ís estimated that 500 kilograms of coke are needed for reheating each tonne of pig iron, while 50 kilograms of pig iron per tonne are Iost during the reheating process.
2.6 Conc]-usion All the data and analysis for China in this chapt,er support the general hypothesis that mineral consumption and IU rise with peï capita income in the early stage of industrialization. Mineral consumption in China has continued to expand over the entire period examined, although the rate of growth did decline since 1990. This slowdown occurred. entirely on accounL of a changed development poricy (from self-reliance and producer goods first, to the open Door Policy) in conjunction with a great diversification in macroeconomic performance. fn contrast to the developed countries, China decidedly exhibits rising IU J-eve1.s throughout most of t.he period under investigation. Meanwhile, closer scrutiny reveals that the difference between China and other developing countries is primarily due to variations in development policy and industrial performance. While stagnating in the industrialized market economies, the share of industrial groups in gross domestic product 63 rose more rapidly in China than that in most other developing countries during the period under study. rndeed, when ru is measured on the basis of GDp or Nr, the rising trend in china is consistent save only f or aruminum, the "neT¡r mineral,'. Although it is difficult to measure how great is the contribution of technological change to reduced mineral consumption and ru over time at each level of GDp peï capita, d.ata for china and rndia with respect to primaïy eneïgy and iron oïe consumptions oveï the past forty yeaïs do suggest that technological introductions play an important rore in affecting material consumption and rU patterns in developing countries. rn païticular, such introductions have served to mitigate the upward trends caused. by GDP growth and structural change. of all the national goals pursued by china since LgLg, the overriding one has been rapid industrialization. fn this scheme, manufacturing indust.ry, especiarly heavy industry, has been at the forefront and has remained there even after the adoption of the open Door policy. Despite sharp disagreement among westeïn observers about the couïse of industrialization china has taken since 1949, and how to evaluate it, there is one thing that all can agree on. This concerns mineral usage. rt can be stated that implications of the economic and. social changes occurring in china bear similarities to the experiences of other countries in terms of its mÍneral and eneïgy consumption patterns. Minerar and eneïgy consumption per capita increases a10ng with the pïocess of industrialization on the one hand, and material-intensity of use 64 turns dov¡n after reaching some point when the overarr economic activity is diversified on the other. All of the above findingls unequivocally confirm that the onset of industrialization' as expressed in the characteristics of the early stage' brings about a great need for mineral materials, and. along with such changes mineral ïesouïces collectively come to be the key factor in facilitating economic development. As a resurt, if any country wants to enjoy a rapid economic growth, it must gain access to a plentiful and stable mineral supply. rndeed, discussion of the changing pattern of mineral consumption is just a start in our understanding of the relationships between mineral activity and national development. since consumption is determined by demand and supply' the next chapter wirl, therefoïe, focus on the rore of mineral supply in national development in terms of China's experience. This addresses the second of the six targets. 65 Notes: tl1 The term Gross social value output (csvo) is defined as the sum of the gross value produced within a certain period by arl materiar-producing sectors of the national economy; that is, i-ndustry, agiriculture,
construction, transportation and communication, and commerce.
121 National rncome (Nr) represents the sum of net output value of all the five material-producing sectors of the national economy.
t3l rntensity of use of Materials (r-u) is defined as a common way to measure the quanti_ty of any special industriar raw materiar- a nation uses over a given period. Mathematicarly, it can be expïessed as follows: rU = D/GDP where D indicates the consumption (demand) of the material and GDp represents the gross domestic product. 66
CEAPTER TIT MII{ER.AL MATERTAI SUPPLY
3.1 fntroduction The initiation of industrialization causes a great change not only in the pattern of social demand but also in the form of social production. The impressive increase in mÍneral consumption, as discussed in chapter rr, implies that any kind of societal achievement in the modern world is dependent to a great extent on the development of mineral ïesouïces. The rise of the modern industrial sector, defined as manufacturing based on mineral exploitation and processing, becomes the dominant souïce of economic growth. As a result, a rapid economic arowth in most countries, if it is to be sustained, must have access t.o prentiful supplies of minerals at the lowest cost. This is particularly true for developing countries, because the initial structure of factor inputs (consisting of land, capital and labour) foï social_ production in these societies is characterized by serious shortages of capitaf and skilled labour (often expïessed through technology). To initiate their mod.ern industry and develop theiï economies, most developing countries have little choice but to use their mineral resources (a part of land) as an instrument. rn this sense, one of the most important tasks for developing countries is to build up a stable mineral supply system to secure the material inputs for the entire production system. The chinese pïactice could provide a good example to test the importance of mineral suppry in fostering the national economy. considering the complication of the relationship 67 between mineral industry and economic arowth, this chapter is designed to focus mainly on the contributions of mineral industry and supply to internal development in terms of the target system of this study; namely, the second. of the six targets, and. leave the effects of mineral trade in the international market to the next chapter.
3.2 Resource Bases
For a prolonged period there üras no clear picture of the whole situation pertaining to mineral resources in china. fndeed, because of very slow progress in modern geological work before Lg49, only 18 kinds of minerals, such as iron oïe, manganese, tungsten and coal' had proven reseïves and. even these vreïe fairly inconsequentiaJ- . rn the more than 40 yeaïs foltowing the founding of the People's Republic, geological suïvey and exploration of mineral resources T^rere dramatically stepped up. Both regional geol0gical survey at a scale of 1:110001000 coveringr the entire country and that conforming to a scale of l:200,000 covering two-thirds of the country Iiüere completed.. Moreoveï, aeïomagnetic suïveys noür coveï more t'han 90 per cent of onshore and offshore aïeas, and regional gravity surveys cover 40 peï cent of the land aïea. rn fact, a general geological survey of mineral ïesouïces has been started in most parts of the country, and exploration of major minerars in large and middle-sized mining aïeas at varying levels of thoroughness has been carried out. As a result, pïoven mineral 6B resources in china counted 137 of the 160 knovm kinds of minerals present in the world (using a base of 1985). Among their numbers are seven types of energy resources/ five types of ferrous metal minerals, 20 kinds of nonferrous meta]- and noble metal minerals, 2B kinds of rare earths' ïare earth metals and other ïaïe element minerals, 10 supplementaïy ïat¡.r material minerals for metallurgical purposes' 23 kinds of non-metal chemical materials, an¿43 kinds of building material minerals and other non-metal minerals. No less than 15'000 mineral deposits in large and middle sizes have been discovered throughout the country (Figures 3-1 and 3-2). rn short, china is one of only a few countries in the world enjoyÍng a rich variety, indeed, a qui-te complete set of mineral reserves with a great development potential. (Table 3_1).
3.3 Policy Framework for the Development of Mining rndustry As mentioned in chapter r, the moder of the priority growth of department r favours factor inputs, especially capit,al. Mineral products, thereforer âs part of capital (in the chinese view, mineral resources aïe judged t.o be a component of capital, a radical departure from the western view) receive a high priority in development decisions. Following consideration of natural resources' human endowments (quantity and quality) and financial availability, the chinese government elected to give preference to minerar resources as the first step in economic d.everopment. rn order to achieve this end, some important policies have been formulated for the development of mineral industry since the 1950s. AE ^^
^ oo^ E r $ ce ^¡ e^^ OE^ r!o 9-^e9 ê IE ti EA A ø êoauo ^ <}ê^ ê aê tlao tr E t nËo ) LudlZinc O Mica ll Magnæim o Bauiø ê ItrË Q Á Gold I M"."u.y Ä Iron oeE I Wotfran Q Phosphorw Ø M*guo.* I E Nícket g Asbcstos A, cnro.¡* I r¡n O Fluors¡ru þ Coppcr I Antimony Â, Molybdem- 0 360 ?æ km 0 jio kin
Figure 3-1 MetatlurgÍcal and Non-Fuel Minerals Deposits in chÍna 4*,ffi r¡¡ *ll'.]ffi r ¡'t+íli: r r I li . r. íi,iíffi T i l¡ I ¡ l I .¡iiìÌi::,:*,.,. I T+lffi. '*''li"¡ ,,r+üìiliÈ - +!ffi r r r¡ r¡t I !¡
¡ Coal Ä Petroleum A Nanrdgæ
*T= *#',.ì:Ëü,i,ä:åi* I
I
0 4-10 knr
Figure 3-2. Non-Renewable Energy Resources in China 7L Table 3-1 Proven Minera]. Resources of China, 1985 Minerals China/s rank in the World The leading Countries CoaI 3 The United States, The Soviet Union* Manganese 4 South Africa, The Soviet Union*, Australia Iron ore 5 The Soviet Union*, Brazi-L, Canada, Australia Copper 6 Chile, The United States, Zambia, Peru Bauxite 6 Guinea, Australia, BrazlL, Jamaica, fndia Lead 5 The United States, Australia, The Soviet Union*, Canad.a Zj-nc 3 Canada, the United States*, Austra]-ia Nicke]. 9 New Caledonia, Canada, Indonesia, the Soviet Union* Tungsten 1 Canada Tin 4 Ind.onesia, Thailand, Malaysia MoJ.ybdenum 3 The United States, Chile Antimony 1 Titanium I Vanadium 2 South Africa Rare earths I Magnesium t Phosphorus 3 Morocco, The Soviet Union* Sulphur 2 Canada
Source : The t¡Iorld Resources Institute l,Io¡.f_d_Bgqp]¡=r^ ces, L992 _ 93 . * the Former-Soviet Union
These policies can be summarized in terms of investment orientation, "walking on two leg,s", technology introduction and material incentives. The following discussion describes the initiatives in question. rnvestment orientation poticy. rn J-at'e Lgs2, after a three-yeaï period of economic recuperation, the Chinese goveïnment decided to undertake long-term economic planning centred on the so-called Five-Year Plans. The First Five-Year plan earmarked the lion's share of investment for the development of the mineral sector. 72 Table 3-2 capita]. rnvestment in Mineral sector (Eundred million Iruan) Meta1 sector Coal Petro- Building Sub- As the tota]- of Period Ferrous Nonferrous leum materials totat fndust'ty ( e.)
I FYP (1953-s7 ) 29 .59 L7.02 29.69 11.98 6.33 94.6L 37. B1 2 FYP 1958-62 ) 130.23 39.00 86. 9B 25.10 23.72 305.03 41. BB Adj. 1963-6s ) L7.79 16. 15 25.15 L6.44 7 .L6 82 .69 39.34 3 FYP L966-7 O t 70.L4 28 .65 46.65 38. B4 L4 .63 198.91 36.73 4 FYP L97 L-7 5, r38.46 34 .62 90.7 4 89.00 30.25 383.07 39.L7 5 FYP 1976- B0 ) L4B .46 4L .24 L36.25 L3L.42 46.90 504.27 40.94 6 FYP 1981-85 ) 148.50 63.08 203.32 L4L.07 78.50 639.48 41--34 7 FYP 1986- 90 ) 26L .86 L43 .64 350.13 377.8L L24.BL L258.25 33. O9 Total- (1953-90) 945.03 383.41 968.91 836.66 332.31 3466.32 37.3I Source: China's Statistics Bureau, Statistics of China's Fixed Cagl-ta! ïnvestment (1950-85). -----China's SËatistics yearbook, 199I.
According to the state's or^rrr statistics, moïe than one-thiïd of the fixed capital formation in tota]- industry went into this sector during that time. The basic investment orientation has not greatly changed since then (see Table 3-2). fn comparison r^rith the generally stable pattern of capital investment in the mineral industry, the investment orientation among mineral sectors has shifted quite considerably in subsequent years in tune with changing political and economic circumstances (see Figure 3-3). During the period from the First Five-year plan to the Fourth Five-Year PIan, metallurgical industry, including ferrous and non-ferrous activities, generally dominated the investment pattern of the mineral industry. About half of the total investment in mineral industry was devoted to the iron and steel industries as well as reJ-ated non-ferrous sectors such as copper/ aluminum, lead, zinc, nicker, tin, antimony, mercuïy, magnesium and titanium so as to fulfil the goal of rapid growth of steel and 5FYP 6FYP TFYP
ffi Iron & Steel ffi Cru¿e Oit I Non_Ferrous ffi nuitAing M.
Figure 3-3 Composition of Capital fnvestment in China's Mineral Industry, 1950-90 74 related products. steel and its af filiates rireïe used as key indicators of the national industrialization. since the period of the Fifth Five-Year PIan, this situation has been altered in tandem with the change in the basic development policy from the ,,Se1f- Reliance" to the "open Dooï", under which the country can import some metallurgical products in sizeable volumes from the outside. AIso a diversifying economic structure may play an important role in steering investment into ner,r channels . Thus, the increased investment in the building material-s' sector since r9B0 partly reflects fast growing demand, especially for cement, because of the boom in house construction throughout the country. The coar industry affords a unique situation. Foï yeaïs, capital investment in the coal industry has essentially stood at a share of between 27 to 30 per cent of the total investment in the mineral industry. The lower share of this sector during the period between L966 and 1975 can be explained away by an initÍative of the government to change the pattern of china's eneïgy economy from heavy reliance on coal (86.5 per cent of the national total eneïgy supply came from coaJ. and its products in 1965) to petroleum. After a painful failure to discover enough pïoven crude oil deposits, this ambitious poricy was dropped in favour of coal (Liu Da-dao, 1989). As a result, coal retains its pre-eminence, albeit constitut.ing a red.uced proportion of totar eneïgy supply (75.6 per cent of the national total eneïgy suppry in 1990, accoïding to China's StatÍstics Bureau, L99l). The petroleum industry, in consequence of limited exploration 75 successes' has experienced a gradually increasing share of the total investment over the years. irustification for this heightened importance is two-fold. Firstly, crude oiJ- and petroleum products play an important part in the national economy; for, not only are they collectively a major source of fuel for modern transportation, but they constitute an essential raw material for petro-chemicals and a valued means to earn foreign cuïïency. Secondly, because of complex geological conditions, this industry need.s moïe capital investment than other sectors in order both to maintain recent production leve1s of the exÍsting oi1.fields lmainly located in the eastern part of the country) and to pïess ahead with exploring newly-proven resources offshoïe as well as in remote aïeas of the west. '}talking on two regs'--a decentrarization policy. considering that a major part of the population (moïe than g0 per cent by some accounts) stirl lives in pooï rural aïeas, the gfovernment decided to look for a ner¡i appïoach in the early 1950s to inject modern technology into the countryside immediately rather than to wait until urban industry has proceeded to a point where its methods have begun to trickl-e down into rural aïeas (Liu Da- dao, 1989). The so-caIled 'warking on two regs' policy, which essentially extended the role taken by the central government in the course of industrialization down to the economic units at the local Ievel, just accounted for the initial stage of this approach (L949-57 ) . Coverage of the policy as a whole is schematized in Figure 3-4. Centralizæd leadership
Figure 3-4 A schematization of 'yJaUcing on Trùo f,egs' poricy
owing to it being aimed at tapping the potential manpower and material resources at the local level so as to employ them to the full (for example, about L2 peï cent of china's proved coal resource cannot be exploited by large-scale operations), and
because of the inadequacies of china's rural transport and. marketing system, the "walking' on two legs" policy can be advocated as an important component of national development strategy. rn particular, it showed that small industries can be developed. as a fundamental part of the nationar economy (Tabre 3-3 and tabre 3-4) in spite of some painful experiences, oï even despite seveïe setbacks when half of the small enterprises closed down after the Great Leap Forward (1959-61) (Jones , L9g0). The development of small coal mines can be seen as one of the best examples of this aspect of national policy.
The myth that South China does not have coal is disproved by the facts: by dint of small-to-medium-sized mines production in this part of the country has been steadily rising and new deposits are constantly being found.. Coal production from similarly-scaled operations in the northwest and other relatively inaccessible aïeas has also been increasing. There are arso many small (tributaïy) 77 Table 3-3 Chinats P]-ant-Sca]-e ClassifÍcati.on and Distribution Type of scale standatd of plant classification Number of of Overall p¡oduction plants accounted for 1985 Ilon and annual production of steel Large over Clude steel 85.0e" 1 ni.Ilion tonnes I3 Pig iron 60.0% (Produced. by large plants) Medim 100,000 to I nillion tonnes snall- Iess than Clude steel 5.3% 100,000 tonnes In al-l aleas Pig iron 25.6"-" other than Tibet (Produced by medim plants) Foundry Large Ännua1 production of pig iron crude over 1 mi.Ilion tonnes steel 9.7% Pig ilon L4 .4"¿ (Produced Medim 200.000 to I million tonues by small plants) SmaIl ]'ess than 200,OOO tonnes Coal mines Ànnual production of law coal over 5 million tonnes Medim 2-5 million tonnes ] 54.3e" of totar output SmaIf .less than 2 million tonnes > 20, 000 45.7"a Power Large fnstalled capacity station over 250,000 kw 96'< (87.4"2 of hydroelectric Medium 25.000 to 250,000 kw power plants) of total SmalI output less than 25,000 kw > 90,000 4"t (L2 .6%l synthetic Large Annual production of sytrthetic amonia amonia over 150,000 ton¡es 28 52.4eó ( 50.6% of all nitrogen fertilizers) Mealium 45.000 to 150,000 tonnes 337 of total output SmaII less than 45,000 tonnes 47.6"r (59.4>"1 large Annual production of cemenË over I million tonnes 60.8% of Medium 200,000 to I million to¡nes ---lro* _] rotat output SmaIl less hhan 20O,OOO tonnes >3,400 39 .2-'" Source: China's statistics Bureau statistical yearbook of china, 1990.
coal mines around the big mines. These small mines of, say, 100- 1000 tonnes of coar per day capacity, opeïaLe at vaïying degrees of efficiency and at different cost leveJ-s, but they alT¡rays serve loca1 industrial complexes and agïicultural communities. They help to keep industry dispersed and compensate for the lack of adequate transportation. so-called small coal mines aïe often either expanded or closed because of availability of ïeseïves oï for other general reasons (e.g. changing local maïkets and administrative justification, Li Wen-yan, I990). 7B rn L973, small coal mines üreïe said to have accounted for about 28 per cent of china's total coal production (roughly 120 nillion tonnes)' and the output in 1985 was more than four times the Lg73 l-evel, reaching s2o milrion tonnes, about 60 peï cent of the national total. vùithout this development, particularly in southern china, shipments from the large mines in shanxi and Henan provinces to south china (incruding shanghai, iriangsu, zl,ejiang, rujian and Guangdong provinces) would have had to be increased nearly by 100 million tonnes moïe than the achieved level of shipment (Li wen_ Yâh' 1990). output increases from small mines in Hunan, Guangdo1g,
Fujian, Guangxi, and. Sichuan r^reïe particularly striking. The same is true for some provinces in the northwest, such as Ningxia and Gansu. Development of small coal mines within the major coar_ producing provinces of the north has also been rapidly implemented. For examPle, more than half the counties of Hebei province now have small- coal mines, and. Henan Province's smal-J--mine coal production in 1985 was moïe than four times the 1973 level. The development of other l-ocal industries, such as pornïeï prants, metal plants and
Table 3-4 Domestic Gross output of Rural Areas in china I rggo (e.) Region Total- Agriculture fndustrv Construction Transport Services China 100.0 46.L 40 .4 5.9 3.5 4.L Se]-ected Regions Hebei r00.0 41.0 46.5 6.6 Shanxi 2.6 J.J 100.0 38.7 44.6 5.1 11 4.8 triaoning 100.0 38.9 49.L 3.8 3.7 4.5 Shandong 100.0 36.6 52.3 6.3 r.7 3.1 Shaanxi 100.0 53.2 29 .0 6.5 6.3 5.0 Gansu 100.0 60.4 20.9 5.8 Henan 6.4 6.5 r00.0 48. B 31.9 7.2 6.4 5.7 source: china's statistics Bureau statistical vearbook of china, rgx. 79 r^rorkshops, fertilizer plants, cement prants, and machinery plants, have followed almost as a matter of couïse (Li wen-yâD, 1990). The policy of foreign technology introduction. rn order to exploit its rich mineral ïesouïces, china, like other developing countries, needs both to introduce moïe modern technology and to increase the efficiency with which a].l ïesources aïe used so that a rapid and sustained economic arowth can be achieved. External economic contracts are desired in china primarily as a souïce of new technology, and they also contribute to greater efficiency. rn fact, they did so even in the inward-directed development period.
As mentioned above, China's planners determined t,o establish a basis of heavy industry in the yeaïs between LgLg and 1960. The gfovernment, therefore, introduced, at a cost of about us$2.66 billion lwhich does not. take into account. "Russian technology transferred free" ¡ complete plants and sets of equipment from the former USSR and easteïn Euïopean countries for 156 key construction projects mainly involved in mineral-based industrj-es such as metallurgy' energy and transportation facilities. The resulL, inter alia, I^Ias an increase in production of 4.66 millj-on tonnes of iron, 5. 86 million tonnes of rolled steel , 3.7 nilrion watts of eJ-ectricity and 25.25 rnillion tonnes of coal. Between 196r and L966, china/s introduction of foreign technology went through an adjustment stage. The focus ,nras primarily on remedying some shortages within the economy and voids in the technology structure. From Lg62 to Lg66, 84 contracts costing about US$280 million l^rere signed, although not much in the BO r^ray of large equipment T¡ras involved. The great change in this period resided in the fact that the main source of the technology shifted from the former USSR and the Eastern European countries to
Japan and western Europe. To be precise, the introduction r^ras mostly for metallurgy, synthetic fibre, and petrochemical industries because of the exploitation of Daqin and shengli oit- fieJ-ds, the two largest oil--fiel-ds in China. The years L973 through L978 witnessed a second suïge in the introduction of foreign technology since Lg49. rn these six yeaïs, more then 300 contracts T^leïe let at a cost of about US$9.9 billion. The main emphasis T^las on projects which involved complete sets of equipment, including a l.7-metre roller machine purchased from (vtlest) Germany by the wuhan steel Plant, 13 sets of large chemical fibre equipment, two sets of large equipment for petrochemicals, etc.
After the ',Open Door" policy vrras announced in Lg7g, Chinars introduction of foreign technology entered a neh' phase that differed markedly from the one ushered in 29 yeaïs earlier in at least three respects. rn the first place, from L97g to the end of L984' China signed 936 contracts for the introduction of technology and equipment at a cost of about us$6.5 billion. Also china signed another 3t933 contracts for foreign capital int,roduction at a cosL of us$17.85 billion. secondly, in the 29 yeaïs before LTTB, the greneral value of purely technological contracts amounted to only a little over one peï cent of the general value of all contracts for high technology introduced in that period. Between L97B and 1982, 81 the value of pure technology contracts amounted to over 12 per cent of the general value of China's total introduction in this period, reflecting a growing proportion of puïe technology in the total (Huang Fang-yi, r9B7 ) . rn the third and last place, the type of foreign technology introduced changed from the purchase of complete sets of plants and equipment to a more diversified form, including joint ventures/ co-operative ventures, sole foreign investment, and technical services.
Despite such great changes, there is one thing that remains constant; namely, the development of mining and mineral processing industries is still the highest priority in the technology introduction- For example, 37 offshore contracts T^rere signed in the earry 1980s with 45 oil companies from L2 countries. over usg2 bil-lion T¡rere invested in 200 of f shore wildcat wells. rn add.ition, about us$3.4 bilrion-worth of equipment in oil-fierds and refineries T^ras imported from l3 countries. Shortages of funds have hindered the development of China's coal- industry despite the country' s rich coal resouïces. since l9B0 china has signed agreements with Japan, Fïance, the united states and Romania as well as with the world Bank, to finance coal development using loans, compensation trade, and co-opeïative management. Foreign funds totalling usg1.51 billion have been d'evoted to the construction of 12 ner,,r coal pits and coal mines, including the Antaibao project in shanxi province, the biggest opencut coal mine in china with an investment totalling usg650 million. These new mines have an aggïegate annual capacity of 49.2 B2 nillion tonnes of coal and help lay the foundation for the steady growth of chinese coal production in the near future. Table 3-5 is eclectic in showing ten completed sets of foreign
technology introd.uced during the period from LgTg to l9g5 and. includes the Baoshan rron and steel complex in shanghai, the single largest project dependent on foreign suppoït. The totar varue of these ten projects rnras neaïly us$3.9 billion, or about 16 peï cent of the country's foreign technology introduction as a whole durÍng that time.
Material incentive--the labour subsidy policy. rn china, a labour subsidy policy has been in operation since the I950s. This policy has set out clear-cut aims which in combination aïe envisaged as a key component of the country's economic arowth
Table 3-5 rntroduced complete sets of Foreign Equipment from 1979 to 1985 Project Site Introduced Started fnvestment from from (us $1,000,000) Products Coa]- Kailuan Hebei West Germany 197 B 44 .6 Kailuan Hebei Raw coal West Germany L97 B 4L.3 Dressed coal Houlinhe Inner Mongolia hlest Germany MetalJ-urgy 19 81 9L .7 Raw coal Baoshan Shanghai ifapan & Iron & steel West Germany L97 B 2904 .3 Rolled stee]- Guixi .fiangxi rfapan and US L97 9 138.4 Copper ore & Copper Guiyan Guizhou ilapan Slnthetic fertilizers L97 9 L77.3 Aluminum Luan Shanxi West Germany Synthetic & ilapan 19 B1 209 .4 ammonia Zhenhai Phosphate Zhejian alapan & Synthetic Netherlands 1980 107.5 ammonia Carbamide Vinchaun Ninxia alapan 198 0 29 .3 Synthetic Urumuqi ammonia Xinjian ilapan I97 9 119. 0 Synthetic Carbamide source: China's statistical Bureau, Fixed capital- rnvestment, 1949-19g5. 83 strategy- The labour force is to be deployed where wanted with dispatch, both to increase productivity and to advance manpor^reï skilIs- Mobility requires moïe and more workers and peasanLs to redeploy to jobs in favoured branches oï sectors; producing more output demands constant attention to noïms for production costs, and maintenance; and learning new skiJ.J-s as rapid technological and organizational changes unfold calls for keen ahraïeness of evolving technical knowledge and changing structural forms. subsidizing mechanisms geared to these ends must systematically pay workers and peasants so that desired behaviour is differentialty compensated and thus reinf orced. means This graded r^rages l subsidi z]rng wages ) and other payments on an interind.ustry, interregional, and acïoss- locality basis to channel workers and peasants where they are most needed (Bunge c Shinn, lgBI).
Prior to the middle of L956, the wage-points (lat.er hrages) weïe initially set up on an eight-grade system, ascending on the basis of skill from grade one through grade eight. Each grad.e received fixed wage-points per month:
Grade 1 2345678 Wage-point.... 136 158 LBA 2L4 248 288 335 390
The points were the same throughout the country, but the monetary value of a wage-point varied according to the prices of five staple commodities (grain, oi1, salt, cotton, and coal) in local aïeas. Thus, for example, in May, 1955, a T^rage-point. in shenyang hïas worth 0.2r3 yuan/ while in Beijing it rnïas 0.247 yuan, reflecting variations in commodity prices. The actual monthly r^rage, therefoïe, 84 Tiras the product of the total wage-points a worker earned and the J-ocal- subsidy of a virage-point.
once the wage-point system was discarded, it was replaced by a similar scheme of direct Trrrage payments with built-in emphasis on increasing output. standard rdage scares aïe set up on a murtiple_ grade basis and can be used for time-rate payment as well as piece- rate payment with subsidies and bonuses added to time-ïate scales where piece-rate techniques are not feasible. Multiple-grade hrage scales have been widely implemented, but the number of grades has varied according to industry and. location. A model scale of this system for the coal-mining industry T^ras:
Vrlage-grade.... L 2 45678 Grade Coefficient..... 1.00 1.18 1.39 1.65 L.94 2.30 2.7L 3.20 Monthly V{age (yuan)... 34.50 40.70 4g.10 56.80 67.L0 79.30 93.60 110.40 wtren the straight wage-grade system superseded the wage-point. mechanism, model wag-e-grade scales r¡reïe fashioned for different industrial sectors and the ratios of highest-to-lowest grade T^ïeïe subsidized to conform with growth priorities geared to the goals of the development strategy, usuarly represented by the Fyps (Five Year Plans¡. Tab1e 3-6 shows the distribution, ïanges, and standard hrages of eight-grade i''rage systems in selected indust.ries. The data strongly reflect the FYPs' emphasis on heavy industry: the ratio of maximum grades and T^Iage rates r^reïe higher f or heavy industry, especially for minerar industry, than they hreïe for righter industries - Thus, while subsidized r^rages r^reïe used throughout industry as a spur to production, they T/ûere moïe pronounced in B5 Table 3-6 Standard t{ages by lrlage Grades, Selected rndustries: China, I-95B
Industry Ratio of B-1 Coal mining 34.5 40 .7 4B.I 56. B 67 .7 79.3 93 .6 110.4 3.20 Steel 34 .5 40.7 48.1 56. B 67 .L 79.3 93 .6 ?ower LLO.4 3.20 34.0 40.1 47 .2 55.6 65.5 77.2 90. 9 l_07.l_ 3.ls Petro].eum 34 .0 39.9 46.8 54.9 64.4 75.5 BB.5 Machinery L03.7 3.05 33.0 38.9 45. B 54.0 63 .6 74.9 BB.2 104.0 3.1_5 lumber milling 33.0 38.6 45.2 52 .9 61. B 72.3 84.6 Chemica].s 99.0 3.00 33.0 38.6 45.2 52.6 61. B 72.4 84.7 99.0 3.00 Textiles 30.4 34.6 4L .3 48.7 56.3 67 .6 79.2 2 .60 Flour milling 29 .0 34.0 39.9 46 .8 54 .6 64 .4 75.4 2.60 Note: 1. This table only presents the standard wage (basic r¡rage) and does not include various types of subsidizing payment. 2. FJ-our milling and textiles Índustries had only seven grades before 1960. Source: China's Statistical Bureau China Yearbook. 1959, Tokyo, 1960.
those industries tagged for most rapid growth. Geographical r^rage differentials I^rere also employed to move technicians and skilled workers to remote or d.esert aïeas. For instance, in Lg56, to attract meta]- i'trorkers to Shanghai and Taiyuan (in Shanxi), subsidizing i,rrages T,üeïe set 9 and 20 per cent oveï the standard scale respectively, and the scale of the migration as a whole was nearly ten thousand workers at that time. petroleum workers hreïe attracted to Yumen in Gansu by subsidizing hïages 30 to 50 per cent higher than t'he standard scale. Recently, China has been putting men into the Taklimagan Desert--the vast., barren cenLre of xinjiang Autonomous Region, 3r000 km away from the coastal areas--to tap a modern treasure: oil. Moïe than 30r000 workers have been mustered for this purpose. Half aïe oïganized into 45 drilling teams and 27 seismic crevrs, whire the rest aïe engaged in road-building and other support functions. These oil men are paid princely r¡rages of up to r,"oro yuan (us$350) a month, or two times more than that of B6 their fellow-workers in the eastern regions. There are big bonuses (at least equalling their rrrrag.es) for finishing a job early. other subsidizing payments can vaïy according to the degree of inherent difficulty of the job and the moïe oï less difficult working environment within which the job is performed (e.g. hot work, undergrround work, work involving heal-th hazards or demanding above- average physical effort).
3.4 Performance of the fndustry A general pattern. Undoubtedly, a].]- these policies enabled the country to allocate whatever ïesouïces it had at its disposal to the development of the mineral industry. over a prolonged period, significant progïess has been achieved in the face of substantial difficulties. Foï a start, a coïps of moïe than g0,000 geologists has been formed, and the discovery of a number of mineral deposits has provided impetus for the rapid d.evelopment of china's mineral industry. rn 1990, total production of the industry reached 5 - 0 billion tonnes of mineral oïes and 15.3 billion cubic metres of naturar gas. Total output value of this prod.uction, excruding cray sand, and stone for construction, is approximatery L22 -3 billion yuan' nearly 6 per cent of the total Índustrial output. This production embraced 138 miJ-lion tonnes of crude oi1, 1'080 million tonnes of raT,ü coal , 284 million tonnes of iron oïe and supplementary raw materials, 7O mi]-]-ion tonnes of nonferrous ore' 53 million tonnes of oïe for the chemical industry, and. 473 million Lonnes of buitding materials lexcluding clay and sand). 87 Table 3-7 output of Selected Mineral- Commodities in China, LgS2- 90 Selected ftems Unit L952 L97 5 1990 (f'Iorld Rank) Coa]- 000,000 tonnes 66. 0 482 .0 rt07g.9 I Crude oi]- 000,000 tonnes 4.4 77.L Iron ore 138.3 5 000,000 tonnes 65.2 118. 0 3 Stee]- 000,000 tonnes 13-s Rolled 25 .4 66 .4 4 steel 000,000 tonnes tl:t 37 .2 51. 5 Copper 5 000 tonnes 9B .6 490.0 6 Lead 000 tonnes 160 .0 286 Zj-rrc .8 6 000 tonnes 99. B 619. 0 4 A]-uminum 000 tonnes 985.5 4,000.0 Mer.cury 000 tonnes Nickel 0.8 2 000 tonnes 3:n 27 .4 9 Magnesium 000 tonnes .. '-urn 25 .0 10 000 tonnes 22 -O 40.0 I Cement 000,000 tonnes Salt 28 .6 46.3 209.7 1 000,000 tonnes 22 .9 14.8 20 .2 3 Sources: 1. Ç\þaf s Statistics yÉgrbookl_l-991. Z. es t992_I993. 3. ABMS American Bureau of Metal S 1991. 1 Data china is now well up among the leaders in the world league table for many mineral commodities; she occupies the first place in the world in the production of coal and cement, third in the output of pig iron, and fourth in the output, of raw steel, as well as fifth in the production of crude oir (refer to Table 3-7).
Contribution to the economy. Normally, a sectort s contribution to the overal-l economy can be measured in terms of its shares of national production (GNP¡ and employment. This rule of thumb applies as much to the mineral sector as to any other.
The total added val-ue of minerals produced in China in 1990 was 131'879 million yuan, accounting for 7.4s per cent of GNp. of this, metallic minerals I^Ias ïesponsible for 46t247 million yuan, or 4s.07 per cent of the industry/s total; eneïgy minerals for 36tL62 milrion yuan, or 37.5g per cent of the totar; and building and other industriar minerar materials for 49t470 million yuanT oï BB L4.35 per cent of the total. The development of the minera1- industry has been aimed principally at meeting china/s domestic need.s. Even sor international trade is very important. rn 1990, export earnings of mineral products amounted to 38tLg2 miJ-lion yuan, or about US$Z tggy million, while imported mineral- products r^reïe valued at 24 | 57 3 million yuan, or usgs,LAL million. Both exported and imported mineral products, therefore, accounted for 3.55 peï cent of GNp compared with a L.43 per cent share of GNp in the 1970s. This improvement of mineral industry in foreign trade reflects a tendency of the growing chinese economy to rely more heavily on mineral input to support its development than was the case before. All these performances of both domestic supply and foreign trade indicate that the mineral industry has already become a significant factor in the country's economy with a share of moïe than ll peï cent of GNP (see Figure 3-5). Incidentally, the international trade perspective wi].l not be pursued further here, since it is the purview of the next chapter. The total employment of the mineral industry in 1990 was about 15.6 millions; that is to sây, about 3 per cent of the national employment t.otal. A breakdown of that total revealed that the energy mineral industry employed nearly 6.7 millionst oï 42.7 peï cent of the industry/s total-; the metal mineral sector had more than 5.0 millions t or less than one-third of the total; an¿ the building and other minerals branches accounted for the rest. It is rÌoI^r opportune to introduce a regional dimension to this study of Mineral products exported Mi¡eral products valued at valued at 38,193 miilion yuan, Imported mineral products - IJ I,ó t9 mrlllon or or US$7.990 million wan.. valued at: 24.573 million . US$ 27,590 mitlion, contribution: 2.16 per yuan , or US$5,141 million, cent of contribution: 7.46 per GNP cent contribution:1.39 per cent of ofGNP. GNP.
Mineral-oriented manufacturine Fuel, including fuel for GNP 1,768,610 million products valued at: 139,494 generation and minerals for yuan, or US$ 370,002 million yuan, or US$29,182 construction valued at: 123,060 million for China in 1990. miilion, contribution: 7.9 oer million yuan, or US$ 25,745 cent of GNP. million, contribution: 1.45 per cent of GNP.
Figure 3-5. contribution of the Mineral Industry to china's Economy, 1990 90 mineralst role in internal development.
3.5 Regional pattern of the Mineral Industry rn L949' the key feature of the regional pattern of China's economy was its disparity: the few industrial establishments r^reïe concentrated in areas close to the coast (Liaoning, Shanghai and southern Jiangsu, and Guangzhou), leaving the rest of the country virtually devoid of infrastructure and grossly undeveloped. Correcting this disparity has been a constant conceïn of the chinese government, both for economic ïeasons (to bïing industrial activities closer to souïces of raw material-s) and for strategic reasons ( as long as it r¡ras concentrated, ind.ustïy was vulnerable in the event of foreign invasion), not to mention social ïeasons
(promoting the reduction of inequalities in living standards). The stated goals of china's regionar policy, therefore, are as forlows: (a)to correct the "irrational" pattern of old.-China's spatial economy; (b) to establish neI^r economic complexes and sufficient interregional specialization t (c) to enhance industrial centres croser to raT¡r materials and consumeï markets ; ( d ) to strike a proper balance between intraregional and interregional- development; (e) to safeguard national defence; and (f) to develop medium and small cities in t'he interior rather than large cities on the coast (cheng chu-yuan/ 1980). The overall goal of dispersal has not been pursued consistently, however, declining in favour especially after the "Open Door" policy of Ig7B. The initial three years (L978-1980) of the modernization 91 progralnme appeared to put much stress on consolidation and tappj_ng the potential of the established industrial- centres. The subsequent ten years (1981-1990), too, 'nras destined to favour "key' pïojects in long-established, experienced industrial aïeas. lespite the oscillations in locational policy, the actual net industrial movemenL over the years has been in the direction of the ostensible goal. Foï the whole period Lg4g-Lg77, the growth of industrial production in the interior (or Middle and Western Zones) has been more rapid than in industrially-orientated coastal (or Eastern) areas (see Tabres 3-g and 3-9). Table 3-10 gives a sunmary of the shifts in locational policy between Lglg and 1990. rn China/s mineral industry, there are two other important factors which greatly impact on its regional distribution. First, minerars cannot be extracted where they are absent, and it is axiomatic that the location of minerals must be recognized as a determining factor for minerar industry. rn china, most of the basic mineral resources aïe found in the northern part of the country. For example, 65 per cent of the coal ïesources is provided in shanxi and rnner Mongolia, and onl-y 4 percent is found in the south and southwest parts of the country. This locational pattern of mineral resources J.ays a fundamental condition for the regional production of the mining industry. secondly, among some of the major mineral resouïces' there are high proportions of pooï quality ores that are difficult to dress and smelt. Most of the iron Tesources have a low iron content labout 34 per cent), for example, and require substantial refining or benefication before being 92 Table 3-8 china's Dich.otomous Regionar pattern, 1990 (*. of nation) fndustrial Zone Industria]- Area TotaI employment GNp output L949 Coasta]- Areas L4 .3 42 .0 53.4 55.5 62 .4 68 fnterior Areas .4 85.7 58.0 36 .6 44 .5 37 .6 31. 6 l-97 B Coastal Areas 14.3 45.2 50.9 fnterior Areas 51. 1 85.7 54. B 49.L 48 .9 1 990 Coasta1 Areas L4 .3 4L .3 45.7 48.3 52 .2 Interior Areas 62.7 85.7 58.7 54 .3 5L.7 47 .8 37 .3 source: china's statistics Bureau chinats statistical yearbooks, 1988, 1gg0 and 1991. Note: Appendix 3-1 shows the division of china into coastal and interior areas
Table 3-9 Regionar Patterns of selected Mineral commodities (e.l Crude Oil Coa]- fron St,eeI Zone L952 1990 L952 1990 L952 1990 L952 1990 The Eastern 53 .7 42 .7 40 .4 2L.9 79 .2 54.5 85.9 58.0 The Midd1e L.4 40.8 50.6 58.2 13.6 33.2 10.3 29.8 The Western 44.9 7.5 9.0 L9.9 7 .2 L2.3 5.8 L2.2 The Whole Country I00.0 100.0 100.0 100.0 Source: China's Statistics Bureau Statistic yearbook of China's Industria]- Economy, 1991. Note: Appendix 3-2 snõwã-trrã ¿ivision of china into tLrree zones
Table 3-10 changing Emphases in china/s Locational policy State fnvestment ('X' denotes priority) Period fnterior (undeveloped) areas Coastal (developed¡ areas
L9s3 - 57 ( IFYP ) X 1958-60 ( 2FYP ) X 1961- 65 (AD,JUSTMENT) L966-7 0 ( 3FYP) X L97 L-7 5 ( 4FYP ) X 1976- B0 ( 5FYP ) 1981-85 ( 6rYP ) x 1986-90 ( TFYP ) X source: china's statistics Bureau china's statistical yearbook, 1991. 93 fed into blast furnaces for smelting. Only 2 per cent of the total ores extracted can go directly into the furnace. In this case, iron and steel plants have to be located in the aïeas where iron oïes are extracted in order t.o reduce operating costs. Alternatively, but stil]- governed by costs, iron and stee]- industry tends to be located in the coastal aïeas if imported iron ore is available, as the location of Baoshan rïon and Steel Complex in Shanghai attests. CoaI industry. In the first half of the twentieth century, coal-mining was more developed. than most other industries (Bunge & shinn, 1981). such major mines as Fushun, Datong and Kailuan produced substantial quantities of coal- for railhrays, shipping and ind.ustry. Expansion of coal-mining was a major goal of the First Five-Year plan. The state invested heavity in mod.ern mining equipment and in the development of large, mechanized mines. The "longwall" mining technique i''ras adopted widely, and output reached 130 million tonnes in L957. During the 1960s and 1970s, investment in large mines and modern equipment ragged, and much of the output growth during this period came from smal-J- loca1 mines. A tempoïaïy but serious production setback followed the JuIy Lg76 Tangshan earthquake, which severely damaged china's most important coal centre' the Kailuan mines. rt took two yeaïs for production at Kailuan to return to the L975 level. The programme to moderni-ze and expand coal-mi-ning in the 1980s emphasized the development of large, fully-mechanized facilities. Most of the machinery r¡ras to be produced domestically, but key modern technology and equipment was imported from foreign 94 countries. As noted above, coal was the countryrs most important source of primary energy in 1990, meeting over 7s.6 peï cent of total energy demand. The 1990 productíon 1evel suïpassed a billion tonnes' with production being undertaken on a large scare in several regions. The North was predominant in accounting for 37.6 per cent of the total (Tab1e 3-11). Mines which produce oveï 10 million tonnes per annum in the country includ.e Datong (neaïly 30.0 million tonnes or Mt), xishan (r5.1 Mt), yangquan (L6.2 Mt), Luan (10.1 Mt) and Jincheng (10.3 Mt) in shanxi; Kailuan (17.8 Mt) and Fengfeng ( 11.5 Mt,) in Hebei; Hegang ( 15.7 Mt), Jixi (Ls.t Mt) and shuangyashan (10.6 Mt) in Heilongjiang; Fuxin (11.0 Mt) in Liaoning; Pingd.ingshan ( 17.5 Mt) and. yima ( r0.7 Mt) in Henani Huaibei (14.2 Mt) and Huainan (10.1 Mt) in Anhui; and xiuzhou (13.2 Mt) in,fiangsu. Shanxi j-s the most important province for both coal production (over 280 million tonnes) and coal reseïves (oveï 2OO
Table 3-11 Regional production of Energy Minerals I Lggo (e.) rlectricitv region Coal oil Gas Total (Hydro ) North 37 .60 7.s2 4.7L L7 .3 L.2 North-east L4.79 52 .69 28 .68 L6 .4 B.B East 13 .62 24 .88 9. 65 28.7 L4 .3 Central-South L4.L2 7 .42 9.58 20 .4 40 .4 South-west LL.77 o.L2 43 .46 9.2 2L.3 North-west B .10 7 .37 3 .92 8.0 14.0 Tota1 100.0 100. O 100.0 100.0 t"a"t 100.0 "-"""a t,4?r ) g2.4(bnkr^rh) source: china's statistics Bureau, statisticar yearbook, Note:a.mnt=mi11iontonnes;b.bns.bnkwh=bi11ion 1991. kilowatt hours; d. Appendix 3-3 shows thé ¿ivision oi china regions. into six 95 billion tonnes). It produced only one-fifth of China's coal in 1981r âs compared with over one-quarter in 1990 (Fig. 3-6).
Oi1 and çfas industry. Bef ore L949 most of the oil T¡ras imported. During the First Five-year plan, the country invested heavily in exploration for new oilfields and development of new and existing wells. rn L959 the vast ïeseïves of the Song-Liao basin I^rere discovered and the Daqing oilfield went into operation in 1960 (Figure 3-71. Daqing had produced about 2.3 million tonnes of oil by L963 and continued to lead the industry through the 1970s. Further important discoveries, includ.ing the major oilfields of Shengli' Dagang, and Huabei, enabled China to meet domestic needs and eliminate nearly arl import,s by the mid-1960s (Li hten-yan, 1990). After 20 years of intensified geotogical investigation, it hras confirmed that oil reseïves T,üeïe large and widely dispersed throughout the country. rn general, development is concentrated on deposits readily accessible to major industrial and population centres. Deposits in remote areas such as the Tarim, Junggar, and Saidam basins remain largely unexplored. offshore exploration and drilling hrere first undertaken in the early 1970s and became more widespread and advanced as the decade progressed.. Endeavours of this kind T/ùere concentrated in areas in the South China Sea, GuIf of Tonkin and Zhu iriang (peaïl River) Derta in the south, and the Bohai Gulf in the north. According to the State Statistical Buïeau7
China's output of crude oil in 1990 T^ras 13I . 3 million tonnes . onshore production totalled L37 miJ.lion tonnes compared with offshore output of L.2 nilrion tonnes. The Daqing oilfield in Nvir¡n Hegang ! Shuangyashm !
\ Huotintrc
Annual production (million tonnes) X 'ro I lo-20 I 5-lo I 3-5 ' Other key coal mines N Under construction and planned 0 360 720 km 0 440 kô
Figure 3-6. Distribution of Coal-Mining Industry in China, 1990 o*"fatt*
".0," !* *,,u"
Fushun
¡* Beijir Yumen Tianjin
¡! Shiiiæh
Luoyæg \ ¡ Nanjing
Choancoine - rueyang
Annual production (million ronnes) f; lage-siæaolt relineries I Smdt oilficlds (>2.5Mil.ton9yr) - Mcdiun-siæd I * oit refincries fl N¡rhl g6 fietds (2.5-0.9 Ml. tons/yr) fl oit refìnde unda A oilficlds under I coßhclon cxploútion I Lrgeoilnetas Oitpipcline - I Mediumoilfields ffi Gåspipelinc 0 360 72O knm I L-/ ll - lÈ 0o___gok' 44O km I ll I i sstsffist¡:¡:itli!ùs::¡:¡t¡¡NlrÈr$\*attaH'.1ñ:i::i¡::::iñ:t:i::i:itsür:r:::¡iÊiñaahìls+::{-:rr*r:::rü!:rrÈs\wrrr.xta\ïf.".rr*r-.r*,rrr.-,rr-"d N
Figure 3-7. Crude Oil and Natural Gas Extraction and Refining Industry in China, 1990 9B Heilongjiang accounted for more than 55 million tonnes; Shengli oilfield in Shangdong added more than 33 million tonnes; Huabei
oilfield in Hebei l¡ras responsible f or less than 5 .4 million tonnes; Liaohe oilfield in Liaoning for 13.6 million tonnes; xinjiang oilfield in xinjiang for less than 7 million tonnes; Dagang oilfield in Tianjin for moïe than 3.8 million tonnes; Zhongyuan oilfield ín Henan for 6.3 milJ-ion tonnes; Henan oilfield in Henan for 2.5 million tonnes; Jilin oitfield in Jilin for more than 3.5 million tonnes; and Changqing o]-ifie]-d in Shaanxi for less than 1.5 million tonnes. Altogether, they accounted for about 96 per cent of the national production. The output of the offshore oilfield in the Bohai Gulf alone accounted for about T5 per cent of total offshore oil production, while the South China Sea contributed the remainder. In L973, output was large enough to export a million tonnes of crude oil to Japan. In 1985 exports of crud.e oil amounted to over 30 million tonnes, 24 per cent of total- production. Subsequently,
exports diminished sharply because of fast-growing internal demand for petroleum products. In LggO, China exported about 24 million tonnes of crude oil, one-fifth less than the figure for 19g5. Although the government temporari]-y abandoned its drive to broaden its oil exports in 1990/ 138.3 mi]-lion tonnes of crude oil still rnrere producedr ân increase of L3.4 million tonnes oveï 1985. Natural gas r¡ras a reratively minor source of eneïgy. output grer^r rapidly in the 1960s and 1970s. By 1990 prod.uction r¡ras approximately L5.2 billion cubic metres--slightly more than 2 per 99 cent of China's primary energy supply. Sichuan Province possesses about half of Chinats natural gas reseïves and accounts for about 43 per cent of annual production. Most of the remaining natural gas is produced at the Daqing and. the Liaohe oil-fields in the northeast, as well as the Zhongyuan oilfield in Henan. Other gas- producing areas include the Shengli oilfields, Zhongyuan oilfield., xinjiang oilfield, and Dagang oilfield; the coastal plain in Jiangsu and Zhejinang provinces and the offshore oilfietds nearby; the Huabei complex in Hebei Province; and the oilfields in Xinjiang A. R. A rudimentary petroleum-refining ind.ustry was established with
Soviet aid in the 1950s. rn the 1960s and L970s, this base r^ras modernized and expanded, partry with European and Japanese equipment. In 1990 Chinese refineries T^reïe capable of processing about 2.L mirlion barrels per day. of the totar refining capability, B3 percent belonged to 23 large petroleum-refining plants with an annual capacity of oveï 2.5 million tonnes ea.ch (Li Wen-yan' f990). There I¡Iere also 13 medium and 38 small-size oil- refiníng plants. All these pJ-ants üreïe dispersed throughout the country. Iron and steeJ. industry. Before L949 the iron and stee]- industry was small and dispersed; the only modern steel facitity of any size r^ras constructed at Anshan in the Northeast by the Japanese. Total output of steel by a1-1- plants reached a maximum of 1401000 tonnes in L949. Since the establishment of the pRC, the country has 100 consistently allotted. large amounts of investment to expanding steel output capacity. Annual steel production, horøeveï, has proved to be extremely sensitive to changes in economic policies and political climate. In the 1950s steel output ïose steadily as Soviet advisers helped create the basis of the enlarged iron and steel industry, inst,alli-ng numerous Soviet-designed blast furnaces and open-hearth furnaces. The Great Leap Forward sahT a fantastic burgeoning of prirnitive backyard furnaces and small modern plants, overuse of large plants, and. exaggerated production reports. rn r96L the industry broke down; nearly aJ-I the small plants weïe closed, and output fell to less than one-half the amount reported for 1960. From L96L to L965, output gradually ïecovered as damage T¡Ias repaired and steel technology r^ras advanced by the purchase of basic oxygen furnaces from Austria and electric furnaces from Japan. Production fell again during the early years of the Cultural Revolution but resumed a rapid rate of growth in the relative political stability of L969 and the early 1970s. From Lg76 output climbed steadily and in L990 reached 66.4 million tonnes, making China the fourth largest producer in the world. rn 1990 china's steel industry r¡ras centred on 1l rarge facilities which had annual capacities of I million tonnes oï moïe and which, in combination, produced B0 to 90 percent of total output. The fu1ly-integrated complex at Anshan r,rlas China's largest steel centre, producing over 11.6 per cent ( 7.71 rnillion tonnes) of total. national output. The other large f acilities T^reïe at Wuhan (4.74 nilrion tonnes) in ltubei, shoudu (4.36 million tonnes) in o lron & Srcel Complex I @ Stcel plant Pig iron mill I A Iron ore t Coki¡g coal 0 360 720 kn 0 440 km
Figure 3-8. Iron and Steel Industry of China LO2 Beijing, Baotou (2.25 million tonnes) in rnner Mogolia, Benxi (2.37 mirlion tonnes) in Liaoning, Maanshan (2.04 million tonnes) in Anhui, Pantzhihua (1.91 million tonnes) in southern Sichuan Province, Taiyuan (L.4 million tonnes) in shanxi, Tanglshan (1.5s mirlion tonnes) in Hebei, and. chongqing (1.0 milion tonnes) in Sichuan- rn L978 China began construction of its first integrated steel complex, the Baoshan iron and steer works in shanghai, but the completion date moved from Lg82 to 1985 and. finally to 19gg. rts steel output T¡ras 3 .87 million tonnes in 1990, the f ourth largest iron and steel complex in china (Figure 3-s). Besides the large plants' moïe than Lt4o0 medium and smaller Iocal mills I/üere dispersed throughout the country in 1990. They ranged from specialty nills producing under 500,000 tonnes peï yeaï to very small operations under either local jurisdiction oï the control of other ministries. Most of these smaller mil1s produced small quantities of low-grade iron and steel to meet. local needs.
3.6 Conclusion
Long known only as a country pooï in mineral deposits, China is noT^r acknowledged to be a major minerals producer. For yeaïs the government has stressed. the development of the mineral industry so as to foster economic Arowth. The performances of the mineral industry in China during the past forty years suggest that the development of mineral industry can contribute to the national economy through, at least, two aspects. 103 First, if developing countries want to catch the benefits of industrialization and. mobilize the increasing demand for all types of mineral materials, the first objective for them to accomplish is to build up a reliable mineral supply system based on domestic ïesouICeS. second., with the increase of mineral production, the large scale development of mineral industry can be regarded as a powerful enqine for organizing and integrating al-l possible financial, personnel and technical resouïces into enterprises. This property is especialry desirable in countries, like china, which aïe seriously lacking in capita]- and skilled labour and which have Iimited knowledge of the potential of their land ïesouïces. rn this sense' the successful est.ablishment of mineral industry can serve as a springboard for further development. HithertoT our attention has mainly concentrated on the changing patterns of domestic minerals/ demand and supply. rn the next chapter, the scrutiny wirl be widened, to incorporate an international trade perspective. fhe coastal areas
o 360 ?20 tn
o {to km
appendix 3-1. The Division of china into coastal and Interior Areas \l WTFA rhe East zon" l.ïffi,ffi rhe Middre z¡nc
0 360 720 km 0 Hh
Appendix 3-2. The Division of China into Three Zones ffi,.,,r-r=-a=_j l The Northæsr ffi The south I I rheNorthwest F),-tiifl TheSourhwesr ffi rhcEast lH\\ rheNorth o*__il___]ro *-
Appendix 3-3. The Division of China into Six Regions 1"07 CEAPTER IV CETNA' UIIÙER^AL S INDUSTRY AND TTS RELEVAIICE TO TEE üIORf,D IIÍARKET 4.I Introduction Many people believe that minerals trade makes its greatest contribution to economic development in the developing countries since much of the world/s mineral trade originates in these aïeas. rnternational mineral trade is far more important to the developing countries than to the industrial nations both in relative and, by and large, in absolute terms. A widely-held view is that mineral exports can inject additional income into the domestic economies of developing countries and, as a result, increase total demand for domestically-produced output. This chapter wirr sperr out the so- carled mineral-export-led growth hypothesis which r have mentioned in chapter r under the guise of the third of the targets for enquiry.
Mindful of the then-contemporary experience, Marshall (r920) declared that 'the causes which determine the economic progress of nations belong to the study of international trade'. During the formative years L46o-1600 (wallenstein, Lg74,) | the growth of worrd trade first produced a spatially-undifferentiated pattern but, beginning with the emeïgence of Dutch 'hegemony, in the 17th century (wallenstein, 19g0¡ and more strongly foll0wing the / rndustrial Revoluti oD, , a nerÁr international trade pattern appeared. Contemporary with this period of internationalization of commodity trade (Palloix I Lg77 ) | the industrializing regÍons of Europe speciarized in manufacturing while the colonies and other 108 parts of the world specialized in agricultural production which was destined for markets in the industrializing regions. rn the lgth century, the pattern of tgrowth through trade' affected particularly the new countries or the rregions of recent settlementt in the worrdts temperate latitudes: canada, Argentina, uruguay/ south Africa, Austratia and New Zealand. No doubt the united states, too, belongs substantiarry to this group. These regions had certain essential characteristics in common, but in the present context what matters is their high, though varying, dependence on growth through primary commodity exports and on the private f oreign investment which, directry oï indirectry, r¡ras thereby induced. The historical process of international trade began entering a j-n new phase the 2Oth century and particularly since the mid-1960s (Forbes, L982) - The world economy has expanded greatly. production processes are more and more internationalized (Grunwald and F1amm, 1985¡ and all kinds of international economic flows have increased in volume and importance. virtually eveïy national economy in the world is to some extent integrated in the internationar economy, and is thus affected in one rnïay oï another by decisions, pïocesses and developments outside its borders. rn this interconnected oï even interdependent world, international economic co-operation is, by definition, of vital importance in regional deveropment. rt rests, in fact, on one type of internationar economic co-operation; namely, international trade. Although the economic rerevance of types of co-operation, such as labour migration and tourism, :an"= 109 has increased., trade still is the single most important form of international economic co-operation. rt represents a major portion of the monetary flows in circulation and it has immense direct impact on the local economies (lever of emproyment, income etc. ) involved- Most national economies have become increasingly open over the past few decades. Between 1965 and 1975, for example, the trade/GNP ratio (in percentage terms) of 96 out of the total of 116 countries increased, rising from an average of 4g.L in 1965 to 55.4 in L975 (Taylor and irodice, L9s3). Especially noteworthy was the fact that economic policies entailing appropriate investment incentives for exports appeared to take on a central importance in economic the arowth occurring in developing countries, while some other countries which neglected their export sectors through discriminatory economic policies had to sett].e for lower rates of economic arowth as a result (Tyleï, LgBl). Duïing the present century, and especially since the last world r^raï, the density of the network of international trade relations has increased. Because of the fast deveropment of communications and transport technologies ' more and moïe of the potential trade links ï^Ieïe actual-J-y made effective (Nierop and De Vos, 19BB). As to minerals trade, the U.S. Bureau of Mines maintains that mineral commodities constituted about 26 per cent of the value of total worrd trade in the 1960s, diminishing to approximately 20 per cent in the 1970s. By virtue of the nature of minerars, their importance in world trade assumed significantly proportion in terms of physical volume (roughly accounting for 40 per cent of the total 110 volume of world. trade in the 1970s¡. Reverting to value terms , by 1981 mineral commodities accounted. for about 18 per cent of the
total value of world trade. Crude oi]- alone accounted for about 16 per cent, making it the single most important commodity in international trade. The decline undergone by mineral commodities as a proportion of the value of world trade during the last three decades is attributed less to the reduction in the importance of minerals in developing countries and moïe to the rise of product exports frlm developed countries which, in any event, T^reïe responsible for two-thirds of the value of world trade. Automobiles and electronic aoods loomed much larger in trade flows between advanced-industrial countries (US Department of Commerce, Lggzl. Notwithstanding these overarching developments, mineral commodity trade during this period expanded roughly sixfold in terms of current dollars; that is, equivalent. to doubfing the real value of mineral commodities in international trade in constant dollars (Mccarl and Waters, 19S5). In fact, the definition enveloping al-l of mineral commodities in international trade is needlessly lirniting. rf ilrle expand the traditional definition of mineral commodities to include semifinished products such as iron and steel (in addition to iron ore ) together with ref ined metals such as coppeï, lead., zj-:r.,c, aluminum, and tin, mineral commodities in world. trad.e constituted. 30 to 33 per cent of total export trad.e in aJ-J. commodities during the period 1976-80 ( US Bureau of Mines, L9B2). rn addition, the us Bureau of Mines estimates the value of 111 all mineral commodities consumed in the world (at the national leveI) and' compaïes this value to total- worldwide commodity consumption. By this system mineral commodities ïange from 35-40 per cent of all commodities consumed. each yeaï in all countries. Granted the extended d.efinition, it is evident that minerals, especially the fossil fuels, constitute a significant proportion of both total economic activity and total international trade. considering that moïe than 40 peï cent of the total mineral commodities originated in developing countries, it is obvious that mineral commodities constitute an important source of hard curïency for their producers. rn facilitating investment flows from developed into developing countries so as to initiate mineral exports' the trade fulfils an important catalytic rore. ït is because of these reasons that mineral export has become fashionable in many developing countries since the r960s. The investment facilitating role has come to the forefront with appreciation of 'globalizationt of international business. rt was only in the 1970s that academics began to focus on the role of the very large global corporations in fostering changes in industrial location at the international scare (Taylor and Thrift, L9B2b; Peet' 1983). The rapidity of such changes has prompted reference to the hypermobility of capitar brought about as corporations seek to maximize returns by engaging 'in a continual process of locationar reselection and rationarization/ (Tayror and rhrift' 1983). The major consideration in this process seems to have been the cost and control of labour, and. most explanations of LL2 the redistribution of many basic manufacturing industries towards the newly-industrializing countries (NIcs) have explicitly linked. the organizational capabilities of the globa1 corporation to the product-cycle hypothesis in accounting for the emerçfence of a rnew international division of labour' (Hymeï, Lg72; Frobel, Heinrichs, and Drege, t-980). Because of the widely acknowledged significance of the labour factor, the influence of spatial variations in the cost and availabiJ-ity of ïaw materials upon the location of industry is generally considered to have declined in importance as a consequence of changes in the structure of manufacturing and in the economics of transportation (Esta]-]- and Buchanan, 19gO; Smith, 1981). However, this conclusion is usua]-]-y based on the results of analyses couched at meso- or national scales (Hoare/ 19g3 ) and is not necessarily appropriate at the international level (Chapman, 1985). The desire to gain access to key ïesouïces has frequently been identified in studies of corporate growth as a motivation factor in the transition from national to mul-tinat.ional operations (Mckern, L976; Taylor and Thrift, 1982a). sharp increases in the cost of oil since J-973 have adversely affected industries such as iron and steel, chemicals, and grass, in which eneïgy costs typically account for moïe than 10 peï cent of total production cost. rn these circumstances, it is not surprising to find that energy and Tesource costs have become a moïe important consideration in the international investment strategies of such corporations as British chemicals giant, rcr, (crarke, LgB2, and that one consequence of such strategies has been the weakening of . 113 the position of many oil-importing countries relative to others with a comparative-cost advantage for energy-intensive manufacturing. Political considerations have reinforced these trends as the establishment of more ef f ective cartels of rarir- material producers and increased competition between the developed countries for access to key resouïces have made it less easy for global corporations to resist pïessure to undertake value-added processing operations within the territory of the resouïce-ovüneï. Recent .rapanese investment in rndonesia, for example, has been interpreted as an attempt to secuïe contro1- of oil and gas (Forbes, L9821 | and several oil-rich states in the Mid.dle East aïe attempting to institute co-opeïation Ín major industrial development progranmes (Er Mal]-akh and El Malrakh, Lg82; Turner and
McMullen, L9B2) . As a developing country, China puts great store on foreign trade of mineral products. This trade, in turn, plays a veïy important role in the national economy. The foJ-J-owing discussion sets about demonstrat,ing this importance.
4.2 Growth and pattern of Foreign Trade Growth of Trade Volume. The volume of China's foreign trad,e has fluctuated erratically since Lg4.g. Between 1950 and 1959, the trade volume rose at an aveïage annuar rate of 15 peï cent. As a result of this increase, the growth rate of foreign trade outpaced the 9 per cent annual increase in GNP. The major ïeason for this impressive performance üIas the rapid industrialization und.eï ï^ray LL4 during the 1950s when china's investment ïose at an aveïage annual rate of over 20 per cent. of the total- investment, approximately one-third r^ras earmarked f or the purchase of machinery and equipment' and one-half of the machinery and equipment needed was imported from abroad, mainly from the former ussR. The high import component of capital investment entailed an upsuïge in imports (Cheng Chu-yuan, L9B2 ) . rn the decade of the 1960s, the growth trends were reversed.. Three successive years of crop failures in 1959-6r produced an acute agricultural crisis, a crisis which spilled oveï into the rest of the economy. The resu]-tant contraction led to a drastic curtailment of investment, which in turn caused a sharp decline in imports- luring this ten-year period, foreign trade not onry failed to groT,ù but actually declined in absolute terms. By Lg6g, the combined volume of imports and exports stood at L2 per cent of GNp below the 1959 peak, although GNp had risen by approximatery 40 per cent in the same period. Thus economic policy in this decade placed the emphasis on self-sufficiency and on the internal generation of growth.
The self-reliance doctrine r¡rras substantially modified in the 1970s. capital investment in industry during LgTL-72 increased dramatically. To facilitate the nerrrT expansion, china imported an increasing amount of machinery and equipment, including complete plants and technology from the west. Tïade turnover moïe than tripled between L97o and Lg75 to achieve the highest growth rate since L949. 115 rn the modernization drive that started in 1979 China succeeded
in unleashing a massive programme to acquire Western equipment and. technology in order to break development constraints and to accelerate the pace of industrialÍzation. Foreign trade has been pushed to the forefront, assuming a much moïe important role than in earlier periods. The Chinese government employed all possible means in pursuit of its target of foreign-trade development. The first law on joint ventures was issued in Lg7g, and it was followed by the creation of four special economic zones (SEZs) and the introduction of financial incentives to encouïagie traders to export. These moves' indeed, caused. trade to burgeon. Between l9g0 and 1990, the total. volume of foreign trade increased moïe than threefold to over US$110 billion, equivalent to over 3l per cent of GNP--up from just 12 per cent in L979 (see Table 4-1). fn spite of the effects on China's foreign trade of shifting international relations and domestic political movements during the last 40 years, changes in the commodity structure of trade have reflect'ed to a Iarge degree the transformation of the economy and the development strategy adopted. The overseers of the structure of trade long held to the view that it should fulfil a balancing role. rn other words, it üras envisaged that imports should top up d.omestic production shortfalls and provide necessities that could not be produced domestically in sufficient quantity, if at all. Exports , for their part, T^Tere not viewed as an instrument to promote growth and employment, but merely as a necessity to pay for imports. However, in recent years, China has paid more attention to 116 Table 4-l china's Foreign Trade in value, 1950-90 Total Export Import TotaI Export Import Year (cY 0,000,000,000) Foreign trade ( US$ 0,000,000r000) as '-. of GNP 1950 4.L5 2 .02 2.L3 1. 13 0 .55 0.58 9.8 l_gsl 5.95 2 .42 3.53 1. 96 0.76 1.20 L0.2 L952 6.46 2.7L 3.75 L .94 I .20 L.L2 9.8 1953 8.09 3 .48 4.6L 2.37 1. 02 1. 35 L954 8.47 LO.2 4.00 4 .47 2.44 1.15 L.29 10 .1 l_955 l_0.98 4 .87 6.11 3.L4 L.4L L.7 3 L2.2 1956 l_0.87 ).5/ 5.30 3.2L 1. 65 1. 56 L957 10.45 11. 0 s .45 5.00 3.1_0 1. 60 1.50 10 .3 1958 L2.87 6.70 6.L7 3 .87 1. 9B 1. 89 1959 ]-4.93 10 .3 7.BL 7 .L2 4.38 2.26 2.12 10 .9 1960 L2.84 6.33 6.51 L96L 3. B1 1. 86 1. 95 9.5 9.07 4.77 4.30 2.94 L.49 1. 45 8.4 L962 8.09 5.7L 3.38 2 .66 L .49 L.L7 8.1 1963 8.57 5.00 3 .57 2 .92 r. 65 L.27 8.0 L964 9 .7 5 5.s4 4.2L 3 .47 L.92 1. 55 1965 1l_. 7.7 84 6.31 5.53 4.25 2.23 2 .02 7.9 1966 L2 .7 L 6. 60 6. lt_ 4 .62 2.37 2.25 L967 LL.22 7.4 5. 88 5.34 4.L6 2.L4 2 .02 7.0 1968 10. 85 s.76 5.09 4.05 2.L0 1. 95 L969 10.70 7.L 5.98 4.72 4.03 2.20 1. B3 6.2 L970 LL.29 5.68 5 .61 4 .59 2.26 2 L97L 12.09 .33 5.5 6. 85 5.24 4.84 2 .64 2 .20 5.5 L972 14.69 B .29 6 .40 6.30 3.44 2 .86 6.4 L973 22.05 LL.69 10.36 L974 10.98 5.82 5. 16 8.3 29.22 L3.94 T5.28 L4 .57 6. 95 7 .62 L975 29.04 14.30 11. 1 L4.74 L4.75 7.26 7 .49 LO .4 L976 26.4L L3 .48 L2.93 13.43 6.85 6.58 9.8 L977 27.2s L3 .97 l_3.28 14. B0 7 .59 7 .2L 9.3 L978 35.50 L6.76 L8.74 20 .64 9.7s 10. B9 L979 45.46 9.2 2L.L7 24.29 29 .33 13 .66 L5 .67 L2.O 1980 57.00 27.L2 29. B8 38.14 18.12 20 .02 L2.B 19Bt 73.53 36.76 36.77 L9B2 44 .03 22.0L 22 .02 15 .4 77.r3 41.38 35.75 4L.6L 22 .32 L9 .29 L4.9 1983 86.01 43. B3 42.L8 43 .62 22.23 2L.39 13.8 1984 120.1_0 58.05 62.05 53.55 26.L4 27.4L 1985 206.67 L7.3 BO. B9 L25 .7 B 69.60 27.35 42 .25 24.3 1986 285.04 108.21 149. B3 73. B5 30.94 42 .90 29 .4 L9B7 308.42 L47.00 L6L.42 B2 .65 39 .44 43 .22 19BB 382.20 27 .3 L7 6 .67 205.53 LO2 .7 9 47.52 55.28 27 .3 1989 4L5.59 I95.60 2L9.99 I11. 68 52 .54 59. 14 1990 556.01_ 26.L 298.58 257.43 115 .4 B 62 .09 53.35 3L .4 source: china's statistics Bureau (1991) china's statistics yearbook, 1991. LL7
the role of foreign trade in mod.ernization and development, and foreign-trade planning has become less rigid. changes in the structure of imports. Before the establishment of the People's Republic, china's foreign trade pattern was similar to that experienced by underd.eveloped countries in the nineteenth century; that is, a pattern stamped by exporting rar¡r materials and importing consumer and capital goods. After Lglg, imports of consumer goods r¡rere drastical.ly cut, except for necessities such as food-grains- Most of the scaïce foreign exchange available was used to pay for imports of producer goods, mainly consisting of chemicals, and machinery and equipment for the construction of industry and the provision of transportation systems. These constituted about half of total imports during the First Five-year PIan of the people/s Republic (see Table 4_2). There hrere three suïges of technology introd.uction which greatly contributed to the importation of machinery and equipment. The first occurred in the 1950s when complete plants and sets of equipment, at a cost of US$2.66 billion, r^ïeïe introduced from the former UssR and Eastern European countries for 159 large projects invorved in developing certain industries such as metarrurgy, machinery and tractor buirding, coal and electricity. The yeaïs L973 through L97B saw the second suïge when more than 1,530 contracts at a cost of about uS$18 bil-J-ion r^reïe signed,. These emphasized complete sets of equipment, including (as recorded in the last chapter¡ a 1.7-metre rolled steeJ- machine purchased. from (west) Germany, 13 large sets of chemical ferti-LLzer equipment, and 118
Tab1e 4-2 Conposition of China's fmports, 1952-90 (%) Year Tota]. Food Iextiles Minerals Machinery & chemicals Others L952 100.0 0.2 1.3 19.0 30.6 48.9 195 3 100.0 0.2 2.5 19. 0 32.5 L954 100.0 45.8 0.6 6.6 18 .9 33.8 40 .1_ 195 s 100.0 2.2 9.7 19.l_ 32.7 36.3 195 6 l_00.0 L.7 9.3 2L.7 39.2 28.L L957 100. 0 2.2 L2.2 2L.6 32.2 31.8 195 B 100.0 2.3 9.1 33.0 37 .4 LB.2 195 9 100.0 0.3 24 .0 48 .4 L9.6 196 0 100.0 2.5 10. 9 26.9 42 .6 L96L L7.L 100.0 30.6 LL.4 20.8 19 .0 18 .2 L962 100.0 38.0 LL.7 18.3 L2.2 1963 19. I 100.0 36. 1 16. B L4.3 LB.2 L4.6 L964 100.0 38 .2 15 .9 11. 9 18 .3 Ls.7 196 5 100.0 28 .9 L4.B 15. 0 28.5 L2.B L966 100.0 26.L 9.0 19. 0 3l_.6 L4.3 L967 100 .0 22 .9 9.9 27.L 29.7 LO .4 196 B 100.0 22 .8 7.8 26 .0 32.L 11.3 L969 100 .0 23.O 7.9 27 .2 30 .4 11. 5 L97 0 100.0 L9.2 5.6 30.1 33.2 11.9 L97 2 100.0 16. 3 8.9 30.4 31.5 L2.9 L97 3 100.0 20.L 10. 6 29 .8 3L.4 11. 5 L97 4 100.0 20 .4 I0.3 27.s 30.6 IL.2 L97 5 l_00.0 L2 .4 7.7 29 .3 39 .7 10 .9 L97 6 100.0 9.3 7.5 34.2 40.L 8.9 L97 7 100.0 18. 4 10 .4 35.6 32.L 3.5 L97 B l_00.0 L4 .6 10. 6 38.7 32.8 3.3 L97 9 l_00.0 L4 .4 9.8 32.5 38.9 4.4 1_980 100.0 15.5 L5.2 23 .3 4L.L 4.9 19 81 100.0 5 18. 2L.L L9.7 39.7 t_. 0 L9B2 100.0 20 .6 L5.7 23.9 36.4 1983 100.0 3.6 L4.L 6.5 25 .9 37 .L L6 .4 L984 100.0 8.7 9.3 27 .9 51.6 1985 100.0 2.5 5.4 5.1 25 .4 54.3 10 .5 19B6 100.0 7.L 5.8 2L.4 56.4 9.3 L9B7 100.0 6.3 8.5 19.9 52.7 L2.6 198 B 100.0 8.2 7.8 13 .1 5L .4 19.5 1989 100.0 10. 3 8.7 16. 6 47.9 16.5 199 0 100.0 LO.2 7.0 12.B 48.6 20.9 source: china's statistics Bureau china's StqtiStics__vea¡book, various yeaïs. 119 two sets of large equipment for petrochemicals. The third and the largest surge occurred. in the 1980s. During this period., china spent us$ L07 billion for technology introduction, with the .Shanghai Baoshan Iron and Steel Complex alone requiring nearly US$4.78 billion in foreign exchange to j-mport equipment for both Phase I and Phase II of its construction. Minerars and metals, the second l-argest gïoup, accounted for about 20 per cent of all imports in the 1950s and 30 per cent in the 1970s. This category was dominated by semi-manufactured metal, which made up more than two-thirds of the mineral and metal imports. Among this group, nonferïous metal- imports r^rere led by copper' nickel, aluminum and lead. Improvement in Chinese steel quality and variety in the 1980s resulted in a diminishing share for this category of imports. Food-grains comprised the bulk of agricultural imports. In the 1950s' China exported about 0.5 niJ-l.ion tonnes of rice annually and imported virtually no grain at all. This situation changed dramatically when food imports jumped about tenfold in value in 1961 and stood at about 20 per cent of the total imports from then until the mid-1970s mainly on account of natural disasters ( 1960- 62, and political turmoils (The Great Leap Forward and the Cultural Revolution). A sharp upturn in wheat purchases took place in L977- 83, but noÌ^T the increase in the amount of food-grains imported stemmed mainly from the rapid growth of the urban population from L67 million in 1977 to 215 miltion in L9BZ. changes in the structure of exports. Generatly speaking, L20 before L97B china's exports basically consisted of food, textile products and nonferrous and arloy metals. Faïm products, both foodstuffs and raw materialsr accounted for roughly 30-40 per cent of china's exports- After 1961, ho$rever, the export pattern altered drastically. The three years of crop failure in 1959-61 changed the relative weight of farm products in the export portfolio, and its importance plummeted from a high of 45 per cent in 1g53 to a low of t9 per cent in 1961. rn compensation, export of textire products rose from less than 20 per cent in the early 1950s to about 40 per cent in the early 1960s. with the improvement in the agricultural situation, foodstuffs regained the leading role in L964 and kept it until the mid-1970s (see table 4_3). rn the early years of the r970s, while farm products stilr represented about 35 per cent of chinese sales abroad, exports of energy prod'ucts began to assume growing importance. rn the nid- 1950s, china had to import about a quarter of its crude oir and welr over half of its gasorine, kerosene, and dieser oil. rn the 1950-1961 period, china annuarly imported moïe than 3 million tonnes of crude oil from the former ussR and Eastern Euïope. The commissioning of the Daqing oilfield in Lg64 and the subsequent exproitation of the shengli and. Dagang oilfierds Ín North china changed the picture completely. After Lg73, and for the best part of two decades, china became a net exporter of oil and this shift has been the most significant development in the country's trade composition. Arthough china hoped that sales of oil would provide large L2L
Table 4-3 Composition of China's Exports, LgS2_gO (e.) Year Total Food Textiles Minerals Machinery & chemicals Others L952 100.0 39 .4 10. 6 11. 9 0.9 37 .2 l_95 3 100.0 47.s L4.2 t_3 .5 L954 1.1 23.7 100 .0 48.3 L4 .9 13 .1 1.1 22.6 195 5 100.0 45. 3 L7 .0 13 .1 1_. 5 23.L l_95 6 100.0 40 .4 20.L 13 .3 1. B L957 100.0 24.4 34.2 22 .9 16.0 2.2 24.7 195 B 100 .0 35.6 20 .6 L2.9 1959 2.6 28.3 100.0 37 .8 38.8 11. 9 1.9 1960 100.0 9.6 28 .9 38.0 11.3 1.6 20.2 196I_ 100.0 L9 .4 43.2 19.1 1. B L962 100 .0 2L.4 16.5 41. 0 17.8 2.2 L7 .6 1_963 100. 0 25.L 39 .4 13.6 3.5 1B .4 L964 100.0 30.0 29 .5 L4 .6 1965 2.9 23.0 l_00.0 32 .5 22 .6 L4.9 4.L 25.9 1966 100.0 34 .4 2L.9 L4 .3 4.6 L967 24 .8 1_00. 0 34.5 2L. O L4.7 4.6 24.5 1968 l_00.0 34.3 2L.L L4.6 1969 4.9 25.L 100.0 36.2 22 .3 15 .1 5.0 2L.4 L97 0 l_00.0 37 .L 27 .2 L6.7 5.1 L97 13 .9 2 I00.0 37 .0 26 .3 L7.2 5.1 L4.4 L97 3 100.0 38.4 24 .8 L7.B 5.0 14.0 L97 4 100.0 37.2 23.7 1B .1 5.9 15.1 L97 5 100.0 36.3 24.L L8 .4 5.9 L97 6 100.0 15 .3 37 .8 27 .6 20.L 6.0 8.5 L97 7 100.0 30.2 26 .3 25 .4 7.8 10. 3 L97 B 100.0 24.6 27 .9 31.5 8.2 7.8 L97 9 r00. 0 20.7 28.O 34.8 9.2 1980 100.0 7.3 1_8. 6 26 .3 37 .8 9.7 7.6 19 81 100.0 1_6. 6 26.L 38.6 10. B L9B2 100.0 7.9 16. 0 25.L 36 .4 9.3 L3.2 1983 100.0 L4 .7 3s.5 33.5 9.5 1984 100.0 13.8 6.8 30.5 33.1 9.2 L3 .4 198 5 100.0 L7.L 25 .1, 30.5 L2.L 1986 100.0 15 .2 15. r 26.7 2L.3 13. B L987 23.L 100.0 L2.B 28.2 20.8 15. 1 19BB 23.L 100.0 L6.2 30. B LL.7 L6 .6 1989 100.0 25.3 13.9 31. B L2.O L4.L 28.2 199 0 100.0 L2.7 27 .7 L2.B 19. 3 27 .0 Source:China'sStatisticsBureau,variousyeaIs. L22
amounts of foreign exchange, oil has accounted for less than l_0 per cent of export earnings in recent years. As the importance of foodstuffs and mineral products declined, intermediate and finished textile products became increasingly prominent. Foï much of the 1980s' the d.evelopment of textiles and manufactured consumer goods received a high priority and, as a result of increasing investment and material supplies, textiles became the chief contributor to China's exports. Their prominence, however, should not be allowed to detract from the importance of minerals in foreign trade, as the next section makes clear.
4.3 The Role of Mineral Commodities in Foreign Trade: The Cases of OiI- Exports and fron Ore Imports As previously stated, mineral and metar products are veïy important in Chinats foreign trade. For yeaïs 'mineral commodities, has been the second. largest gïoup in china's foreign trade, just behind the category of machinery and chemical ind.ustry. Collectively, it r¡ras responsible for more than 20 per cent of total visible foreign trade. Among the members of the mineral commodities' gïoup, oil stands out. It is the most significant item with respect to contributions to export earnings, effects on composition of exports and balance of payments, to say nothing of its impacts on a variety of general development strategies. The role of oil. in china's exports. After achieving setf- sufficiency in oil in L965, China began to export its crude oil on a small scale in the early 1970s (see Table 4-4). Moïe importantly, neIÂr opportunities beckoned for access to foreign equipment and 1-23 Table 4-4 Role of Oi]. and Fuels in Ïota]- Exports (US$ niJ-1ion)
Crude oil TotaI Total Tota]- "-" of tota]. export oi]- products hydrocarbon fuels export Eyd.rocarbon Fuels L97 2 L2 3t443 0.3 L97 3 - 50 5,819 0.9 L974 402 L34 sse 670 6t949 elo 9.6 L97 7 Bl_ 5 L42 923 11 093 7 t264 13.0 15. 0 L976 730 L46 876 942 6t854 L2.O L3.7 L977 810 243 I_,053 l_,069 7,590 13.0 L4.L L97 B 1,010 202 L t2L2 Lt345 9t745 L2.O 13. B L979 Lt750 7 2_7 2 | 477 2t654 l_3,658 I_8.1 19. 5 1980 4 t22L 4 tSBB L8 tL2O 23.3 25.3 19 81 4t650 5 t054 22 t0LO 2L.L 23 .0 L982 3,398 1,538 4t936 5,353 22t320 22.L 24 .0 2 1983 t966 Lt373 4 ,339 4t7OL 22t230 19. 5 2L.2 1984 4t262 Lt42L 5r683 6t062 26tL40 2L.7 23 .2 I_985 5 t236 Lt45O 6t686 7 t035 27 t35O 24.5 25.7 1986 2t322 7L5 3t037 3 t5B2 30 t940 9.8 11. 6 L987 3 t4O7 760 4tL67 4 tB34 39 r 44L 10 .6 L2.3 2 19BB t638 633 3 t27L 4tOI4 47 t520 6.9 10. 1 l-989 2t750 758 3,508 4r2O2 52r540 6.7 8.0 1990 3, 3 90 877 4t267 5,036 62t090 6.9 8.1 Source: China's Statistics Bureau Chinats Statistics yearbook, years. various technology, since the breakthrough in Sino-American relations, highlighted by the iruly Lg72 visit of Richard Nixon to neijing, promised an end. to China/s isolation. rn line with the new spirit of conciliation, China, with a concomitant emphasis on expanding trade with foreign countries, nolù could obtain advanced technology, machinery and complete plants, as rue]-]- as industrial raw materials and intermediate goods that it could not produce at' home. Moïeover/ it could obtain from abroad consumeï goods in short supply in the domestic market. As a result, total- trade turnover gïel¡r rapidly, rising from usg4.B biltion in 1971 to usgL4.6 bittion ín L974. At the time, China adopted a veïy conseïvative attitude towards trade, making sparing use of credits whire d.isplaying a stïong aversion to incurring any sizeable trade deficits. rn order to L24
expand the domestic production capacities of key materials such as
metallurgical and petrochemical products, the state council in 1973 adopted a proposar, termed 'A Request to rncïease the rmport of Equipment and Expand Economic Exchange", which advocated the import of us$4.3 billion-worth of equipment and whole plants (knovùn
as the "4-3 Programme"). Additional items r¡reïe soon approvedr so that the progranme eventually called for the purchase of us$5.14 billion worth of goods, including a steel rolling mill capable of producing L.7 metre plates, 13 large-scale fertilizer plants, four Iarge chemical-fibre plants, three petrochemical plants and one- al-kyJ.-benzene plant.
The ambitious import pïogïanme raised a nerÂr problem: how would. china pay for these plants? The ansr¡reï was through higher export earnings. up to the early 1970s, as indicated, the burk of chinese exports consisted of foodstuffs and textile products: in Lg1O, these two categories accounted for 64.3 per cent of total exports (recarl Table 4-3,). Thus to enhance foreign exchange earnings, china had to find new products in demand in the world market. under a dual policy called "oil-for-steer" and. "oir-for-machine,,, oil soon emerged to fiJ-l the need.
Domestic oil production was growing rapidly, rising from 30.7 million tonnes in 1970 to 77.L million tonnes in 1975, denoting an average annual growth rate of 20.34 per cent during L}TL-7'. This led to an increasing amount of exportable surplus each yeaï. rn the wake of the first oil crisis in Lg73, prices quadrupled, rising from us$2.70 per barrel in,fune of that yeaï to us$L0.46 per barrel 125 in December L974 (chow chuen-ho I Lgg2). china naturarry became interested in selling its oil in the world market so as to gain from this windfall. The total amount exported ïose from r.53 million tonnes in L972 to nearry L2.0 million tonnes in Lg7s, whire export receipts from fuels soared from usg12 nirlion to usg 1,093 million during those yeaïs (see Table 4-41. china's oil export volume remained at the Lg75 level for the next two years, but rose to 13-5 milrion tonnes in L}TB and produced usg1.2 billion in earning's. EvidentLy, by the nid-1970s, oi]. had become an important export item, and its contribution to aggregate exports stabilized at about 12 per cent oveï the next few years. china started on its second. wave of machinery and equípment imports in L979 when the 'open Dooï' poticy rÂras pïocraimed together with its stress on increased trade and financial exchanges. rn like manner to the first ül'ave' most of these advanced-technology imports r¡rere from Japan and the intention r^ras to pay for them with eneïgy exports' According to the Long-term Trade Agiïeement signed between the two countries, china would buy usglO billion of plants and machinery from Japan during LgTg-g0. rn return, china wourd export 47 millÍon tonnes of crude oil to Japan, an amount constituting half the total exports (by varue) of china to that country. At the outset, china hras confident of raising oil production and oil exports up to 1985' encouraged by the optimistic assessment of its offshore potentiar which prevaired at that time. Hor¡reveï, disillusionment set in very quickly because geologicar suïveys in many offshore zones failed to live up to expectations. rn L26 Tab1e 4-5 OiI- Exports and Oil Production (nil1ion tonnes) Totalooutput Exported crude Import oil. products oil as s" of Crude total c¡ud.e oi1- total- production oil L97 0 0 .19 0. l_9 0.38 30.62 L97 L 0.26 0.6 0.37 0.63 39.4L 0.7 L97 2 0.64 0.89 1. 53 45.67 L97 3 1.83 L.4 1. 16 2 .99 53.61 3.4 L97 4 5. 07 1.48 6. 55 64.85 L97 5 9.88 7.8 2.LO 1l-. 98 77.06 L2.8 L97 6 8.50 1.95 10 .45 L977 87 .L6 9.7 9.11 L .96 11. 07 93.64 L97 B 9.7 11.31 2.L7 13 .48 104 .05 L97 9 13 .43 r0.9 3.03 L6 .46 106.15 L2.7 1980 13.31 4.20 17.51 105.95 19 81 13.87 L2 .6 o.e 4 .67 1B .54 IOL.22 L3.7 L9B2 L4 .68 4.9L 19.59 L02.L2 0.7 1983 L4 L4 .4 1.6 .82 4 .9L L9.73 106. 07 L9B4 22 I_4. 0 L.4 .0L 5.70 27.7L 114 . 61 198 5 30.03 6.2L L9.2 1.1 36.24 L24.90 24 .0 198 6 28.50 5 .46 33.96 130.69 1.6 L987 27 .23 4.94 2L.B 4.L 32.L7 L34.L4 20 .3 198 I 26.05 4.79 30.84 137.05 4.8 198 9 24.39 19. 0 5.9 4.74 29.L3 L37.45 17.B 199 0 23.99 5.26 29.25 8.6 138.31 L7 .3 8.5 Source: China's Statistics Bureau China's Statistics yearbook various years.
consequenceT there was actually a decline in oil production during 1980-82 (see Tab1e 4-5). Meanwhile, serious eneïgy shortages occurred throughout the country. rt hras apparent that china had entered a ner^r stage in terms of energy balance and oiJ- exports. Worse stil1, a trade deficit of US$3 bi]-]-ion r^ras registered in L97B-79, and blamed in part on the expense of importing equipment and technology. The pïogïarnme shifted into reveïse, pJ-anned economic arowth targets Iireïe reduced and a number of technology and plant acquisitions hTere cancerled (chen chu-yuan , L9s2). At the same time' exports of foodstuffs and u-ght industrial products such as textile products were temporarily reduced on account of the need to augment domestic suppry so as to raise riving standards. rn L27 partial compensation, there T^ras a great effort to increase the export of heavy and chemical industrial products. oil again emerged to play a leading rore in boosting chinars expoïts, rising uninterruptedry in the subsequent yeaïs to peak at 36.2 mirlion tonnes in 1985. Apart from increases in the amount exported, the sharp rise Ín the world oil price associated with the second oir crisis of 1979- 80 undoubtedly proved cruciar in borstering chinars oir export earnings. Globar oil prices began to rise appreciably in Lg7g, and soared in 1980 and 1981: saudÍ Arabian light crude T^ras priced at us$23-34 per barrel in Lg7g, us$36.00 in r9B0 and usg42.00 in rgBI (see Appendix 4-Ll. rn tandem with the prices set by opgc, chinese oil earnings gïeI^r rapidly from LgTg to lg8l despite the fact that the totar volume of oil exports increased only by 5 million tonnes between 1978 and 1981 (see Table 4-5). oil's contribution to total exports increased from 12 per cent in r97B to 2L.L per cent in 19g1 (see Table 4-4). The amount exported ïose significantly in LgB4 (reaching 27.7 million tonnes) and 1985 (36.2 million tonnes), bringing in a growing amount of foreign exchange. By r9g5 oil contributed 24.5 peï cent of totar export earnings and had become China's single l-argest export item. The precipitous drop in the price of oil Ín the rater 1980s served to alter the commodity's role in chinese exports. rn fact, world oil prices had been sripping eveï since the peak of 19g1; a fact reflected in the price of Daqing crude (chinars most important export crude) which went d.ovm from usg37 per barrel in tg8t to 128 us$28.7 per barrel in February 1983 and usg26.B per barrer in April 1985 - rn 1986, world oil prices prunged to as row as usg14 per barrer before stabirizing in the range of usgr5_20 per barrer. The average price in 1985 was us$27 per barrelt in 1986 it was us$14.20 per barrel' denoting a drop of 47 percent (see Appendix 4-L,). Naturally, all the oil-exporting countries r¡üeïe badly affected. china's oil export earnings plummeted from usg 6.7 billion in 1985 to us$3'0 billion in 1986, although the amount of oil exported was reduced only from 36.2 million tonnes to slightly ress than 34 million tonnes. As a resurt, oirrs contribution to totar export earnings dropped from 25.g per cent in 1gB5 to LL.2 per cent in 1986, and china rost usg3 bilrion in foreign exchange earnings. This change forced the government to reconsider its oil export policy, and the outcome r^ras a cut in the amounts of oir exported in the successive yeaïs. The drastic drop in oil export earning-s led to considerable changes in the composition of chinese exports after 1986. The averag'e annual share of fuel lmainry crude oi]-¡ in the total r^ïas halved from 23.9 per cent during LgTg-Ls to less than r0 per cent during 1986-1990. The shares of foodstuffs and textile products remained essentially unchanged at about 13 peï cent and 2g peï cent, respectively, while those of machinery and chemicar products rose appreciabry: from 12 peï cent to Lg peï cent. rt is obvious that china adopted the strategy of increasing manufactured goods, exports to compensate for the shortfarl in oil export earnings. From the rate 1960s oir was becoming increasingly important in the L29 fuel mix of china, and it accounted for L4.7 peï cent of total energy consumption in L970, and 23 per cent in L976. But production started to stagnate in LgTg and actua]-ly declined during 1980-83. Growth resumed in 1984, with respectable growth rates during l9g5- 8B' but by 1999 output again stagnated. overalr production increased from 106 million tonnes in 1983 to 138 million tonnes in l_990. Against this background of stagnant domestic production, it should be recalled that oil exports continued to rise uninterruptedly during LgTg-T2. These exports took prace i-n the face of serious eneïgy shortages at home, shortages which in l9g1 alone idled' 20 per cent of the industrial equipment and led to the loss of one-seventh of industrial output. To tackle this problem, china adjusted its economic structure to emphasize those sectors which T^rere not energy-intensive, such as light industry, agriculture and the servÍce sector, and. eneïgy conseïvation r^ras widely practised. vrlhile this poricy worked fairry werl, succeeding in cutting the energy-GDp elasticity from 1.5 during 1965_78 to 0'53 during L979-90, the industrial system was still desperate for energy, particularly the key industrialized aïea in the south__ which had constituted, since 19g0, the single most important foreign-exchange earneï in china. rn 1986, therefore, china amended its policy on oil imports. Previously, when the oil prices T^reïe high' imports had not been encouraged. But with the slump in price in 1986, it became economical to import crude and oi1 products for use in the coastal provinces. oil imports shot up from 0.9 mirlion 130 tonnes in 1985 to 3.5 mirlion tonnes in 1986, before rising further to 1-0'6 milion tonnes j-989. in This, combined with a decrine in oil exports, augmented the supply of oil to the domestic market. As a result' domestic consumption climbed from 95.1 milrion tonnes in 1985 to 116.0 rnirrion tonnes in 1989. The outrays of usg, .4_0.5 billion for oil imports between 1986 and 1988 did not materially diminish the net benefits that oil afforded the country through exports Hor¡rever, imports ' soared to over l0 million tonnes in l9g9 with an outlay of us$1.2 bitlion, threatening for the first time the country's barance of oir trade. rmports, hoTnreveï, receded to 6_ 7 mirlion tonnes in the successive three yeaïs (19g o-g2) while total oil exports generarly remained at the same rever as 1989. The devel0pment of oil export in china indicates that trade in mineral commodities seïves as a two-edged r^reapon for barancing foreign-trade payments on the one hand and breaking domestic suppry bottlenecks on the other. The case of iron oïe imports provi_des additional support for this proposition. rron ore imports- As already mentioned in chapteï rrr, china abounds in iron orez with 50 bir]-ion tonnes of pïoven ïeserves. rron ore deposits have been discovered in nearly 2tooo sites and thej-r distributions cover moïe than 600 counties in 27 provinces and Autonomous Regions. unfortunately, the grade of iron oïe is generarly 10w and most of it has to be beneficiated. Accoïding to the uinistry of Metarlurgicar rndustry, about 98 percent of iron ore reserves are of low quality with aveïage iron content of around 30 per cent. consequentry, many of the technical and economic 131 difficulties encountered by the Chinese in developing their iron and steel ind.ustry derive from inadequate supplies of high-quality iron ore. As a leading sector of any national economy, the iron and steel industry usually enjoys a high priority, and china is no exception on this score. In the past forty yeaïs, it has invested moïe than cg14-3 billion in iron ore-mining, and the output of iron ore had grown to nearly 180 mil]-ion tonnes in 1990 from the 4.3 million tonnes in 1952 (see Figures 4-L and 4-2'). China/s iron ore-mining passed has through three stages. rn the 1950s manual labour r^ras widely used and the ïesource utilization was veïy 1ow. Between 1960 and 1980, semimechnized operations, in which mines r¡reïe equipped with medium- and smal.l-sized machines and equipment, dominated the industry. After 1980, however, mining operations r,rreïe pïogïessively improved, leading towards large-scale modernization. During the Sixth-Five Year Plan period, for example, the industry introduced large electric shovels with an annual capacity of 10 million tonnes of iron ore, large motor belt conveyeïs, large bulrd.ozers etc. Table 4-6 hj-ghlights the labour productivity of the key iron mines in China. rn order to solve the inadequate suppry of high-quality iron ore/ china introduced beneficiation technology from the usSR in the early 1950s (clark, L973). The first completely large-scale iron ore beneficiation plant was established in Anshan in the nid-1950s, and it was followed by prants in wuhan, Baotou, Maanshan, Taiyuan, shoudo (Beijing), chunqing, Jiuquan, panzhihua and Benxi. By the 50
â.40(I) -l 830 õ20
'F 10
0
T949-52 2FYP lFYP Adjust. 3Fyp 4Fyp 5FYP 6FYP TFYP
(FYP:Five-Year plan)
ffi Raw ore handline I Refined dust iron
FÍgure 4-1 Newly-Added Capacity of fron Ore Mining in China, tg1¡-g¡ 180
160 t4 tzo 6o E roo .g u0 .a= ou Q
20
0
1970
(Year)
Figure 4-2 output of rron ore in china for selected years L34 Table 4-6 principa1- Indices of Key Open-Cut 1985 fron trfines in China,
labour productivity Grade of Key enterprises (t/man year) raw ore Stripping rate ( e.) (r) Average 5t66L Shoudu 32.29 2 .3L LL | 945 26.78 Anshan 6t905 2.7L Taiyuan 4t564 32.35 3 .32 Baotou 29.00 1.70 5r568 35.77 Maanshan 5r351_ 3. 10 Vùuhan 2t999 33.82 1. 65 tlainan 45.65 6.30 2t33L 53.16 Panzhihua 4t030 2.3L 31.02 L. 87 Sounce: China's Metallurgical Ministry ra.ar"ai" rndustrv, 1986, neijing, cttinå'ffirgicar-mGhEg House, LriBT .
end of 1990, the country had built up a total annuar mining capacity of 182'2 million tonnes and an annual minerar capacity of 160 million tonnes (recall Figure 4-2). HoT^reveï, compared with the rapid deveropment of the iron and steel processing sector, the iron ore-handling capacity still left much to be desired. During the ten-year period 1gg1-1gg0, ..or example, the output of iron ore and its concentrate increased by an aveïage of 6.6 per cent and 4.g per cent' respectively, whereas the output of pig iron went up by 6.2 per cent and steel production ïose by 6.4 per cent. only six of the eleven key iron and steel enterprises realized self-sufficiency in ore supply; namery, the shoudo (Beijing) rïon and steer company, Anshan rron and steel company, Benxi rïon and steel company, Baotou rTon and steel company, Jiuquan rïon and steel company and Panzhihua rron and steel company. There are three majoï ïeasons for the delayed development of the iron ore-dressing industry. First of arl' the fairly complex technology pïeparation, or beneficiation, of iron ore incrudes a wide ïange of processes, starting with 135 simple operations like sorting, crushing, scïeening, and so forth but extend.ing to much more demanding operations. More comprex beneficiation, which is mostly needed in steelworks such as that at Anshan, involves expensive operations which begin with fine grinding before being forrowed by mechanicar oï magnetic separation, washing, and drying. The final operation is usually agglomeration of fine particles by heat, which is called sintering. The expensive pïocesses entailed in iron-ore dressing mean not onry that substantiar capitar investment is required, but arso that considerable lead-times aïe required for their implementation. According to officiar statistics, between LgTL and 1985, the averag-e lead-time of seven large- and middre_sized iron_ore dressing plants T^ras moïe than ten years, while the average capital investment for them reached nearly cYTo mi]-]-ion (china's statistics Bureau, L99L). secondry, the operational cost for dressed. iron ore is much higher than that of undressed oïe. Generarry speaking, the ratio of operational costs for ïat,'ï iron oïe as opposed to concentrated ore can reach one to ten, implying that cost of concentrated ore is nine times higher than cost of ore in raw form (also see Table 4-7). what is more, the dressing operation results in a higher eneïgy consumption. According to the Metarrurgical Ministry' concentrated oïe consumes eneïgy at twenty times the rate of raw ore (China's Metallurgical Ministry, L9g7). After considering the overalr situation pertaining to the development of the iron and steer industry, the government decided to use imported as welr as domestic iron ore for its expansion 136 Table 4-7 lron Ore Ex-factory price (after ifuly 1984) (Cyltonne) lump of fron Crude iron Grade lron ore Dust iron ore for blast fron ore ( e.) concentrate oïe ore for blast for open furnace furnace hearth 66 74.50 65 72.50 64 70.50 7 4.50 63 68.50 71.50 62 66. 50 68.50 6L 62 .50 65.50 60 62.50 61. 00 55.00 55. 00 59 45.00 60.00 59.50 52.50 52. 50 5B 59.50 42.50 57.50 50.00 50. 00 40.00 s7 58.50 47.50 47.50 55.00 56 56.00 37.50 52.50 45. 00 45.00 35.00 55 55.00 43.50 43.50 s0.00 54 54 33.50 .00 42 .00 42. OO 53 53.00 32.00 4I_. 00 40. 50 30.50 52 52.00 40.00 40.00 51 51. 29.00 00 39.00 37.50 28.50 50 50.00 38.00 36.00 49 37.00 27.50 4B 35.00 26 .50 36. 00 34.00 25.50 47 35.00 33.00 46 34.00 24.00 45 32. 00 23.50 33.00 31.00 23.00 44 32.00 43 30.00 22.50 31.00 29.O0 22.00 Source: China's Meta11urgica1 Ministry Ïron and s China,19B7, Beijing, Metarlurgica@ t
plans in the eaïly 1980s. This policy is summarized in the extract presented below.
hle must develop our stïong points and ove¡come possible' The chief problém'conceïns our shortcomings as far as completely iron ore. rn the past r¡re depended. on domestic i¡on ore, but trom ine nationar point most of our iron mines contain i""" of view, long distances. Because "rã,"'.;ä trris musl ãã-tr.rr"ported for the iron p-;;;"-is-veïy comprex, large-scare investment is needed "r"-p=áaiä"io'¿;;;;iuction periods lengthy' so.1! has been clifficuli-iã-ã".r"rop",,d are very industry' Measures must be-very rhe iron and sreel is not instituteo to-oiàrcome these difficulties. ït necessary for us to engage in all stages of the production pLocess ' some enterprises can import and steel enterprisãs itão-o=", particularly those iron in coastal areas- ir-l¡""e areas laci< iron resources' they can import iron ore from foreign ore import crude steel, roir.d steel-that i",-¡å".ose ";;;=i;;f and even production is most profitably the finaí stage of und.ertaten'in ctrina. we ã.o-lrrrr" begin develop the iron anã steel industry f;;; ;il" point to steel imports (tu Zhen, 1990). of iron ore oï cïude rn line with this policy, the volume of iron ore imported L37
Table 4-8 Volume of Imported lron Ore in China, 19BI__90 Total volume Total value Import Price Grade Trade Year ( 000 r) (US$ Price million) (us$/r) ( e.) ( us$/r) 19 81 3t336.4 54.7L 16.40 L982 62 16.40 3r451.5 s6.07 L6.24 62 198 3 L6.24 4t348.7 9L.5 4 20.87 62 198 4 5t969.8 20 .87 93.59 L5 .67 62 L5 198 5 10, 1_14 0 .67 . 179.09 L7.70 62 L7.70 l_98 6 L2 | oo4 .o 314.56 26.20 L9B7 62 26.20 L2t790.0 330.75 25.86 62 198 B 25 .59 10, 540. 0 259.96 24 .66 62 198 9 24 .66 L2t59O.O 329.95 26.20 62 199 0 t4 340 26.2L | .O 394.13 27.48 62 27.48 source: china's statistics Bureau china's yeaïbook, years. statistics various increased greatly, païticulaïly during the period between l9g5 and 1990 (see Tabre 4-s). rn 19gr, imported iron ore amounted to 3.3 million tonnes and accounted for only 5 per cent. of chinars total iron ore consumption by volume. But by 1990 the volume of imports reached 14.3 million tonnes, and the import ratio increased to nearly 10 per cent of the total consumption. Australia is the major supplier of the imported iron ore, supprying 70 per cent of total imports. Other sources aïe India and North Korea. consequentllr, such a poricy of iron oïe importation brings a great opportunity for china to improve its steel manufacturing industry. rn 1984 the output of china's fabricated steel registered 33 -7 million tonnes, whire the domestic production of iron oïe reached L26 - 7 milrion tonnes. At the same time, china imported nearly 6 million tonnes of iron ore at a cost of usg93.6 nirrion, and 20 million tonnes of steel products, valued at usg6.2 bil1ion. The self -sufficiency ratios r¡rere, therefore, only 63 per cent for steel manufacturing and 91 per cent for china's iron-ore mining, 138 and the ratio in value terms between imported iron ore and steel products r¡ras L267. By 1990 imports of iron ore had increased to L4-3 million tonnes lprices at us$394.L million) while Ímported steel products had declined to 4.Lg million tonnes (worth Us$2'508.2 million). As a result, the self-sufficiency ratio for fabricated steel increased to 93 per cent while the ratio for iron ore declined to 85 per cent. rn consequence, the ratio between imported iron ore and steel products diminished to Lz6, ten times less than that applying in I-984. üIhen we consider that the cost of imported iron ore is only one-tenth of that of imported steel products' it is evident that china must undergo prodigious expansion in ore imports and expand domestic steel production rather than rely on increasing imports of steel products.
4.4 Conc]-usion Generally speaking, the data and analysis for china support the hypothesis that minerals trade can act as an instrument to promote economic Arowth in the developing countries. The cases of crude oil and iron oref the most significant items in China's foreign trade, with the exportation of the former and the importation of the latter dominating the minerals trade of the country, combine to provide good examples of how China uses the minerals trade as a powerful T¡Ieapon intended to promote her national economy. rn other wordsr âs a direct consequence of the minerals trade China has obtained much- needed technologically-advanced machinery; equipment which' in return, helped the country to expand its capacity of 139 mineral production. This reality is consistent with both the long- Tull and the short-run theoretical relationship between minerals trade and. economic Arowth. rn the context of mining activity, modern mining and processing methodsr orl the one hand, have become so capital-intensive and the capital requirement of most modern mines and their attendant infrastructure so large, that few of the developing countries can expect to bring a sizeable project into operation on their own. rn addition to minerals trade, mining activity in developing countries, on the other hand, can play divergent roles. rn some countries, modern mining may seïve as the leading sector so that the expansion of minerals exports stimul-ates technological change and opens up nehr markets, leading to rapid economic growth. rn other countries, mineral production can become a balancing sector in foreign trade, and. its primary function is to finance imports, which usually serves as a means of breaking domestic supply bottlenecks. china's mineral industry offers many insights into the latter course (cheng chu-yuan, L9g2; Hsu, l9g9; and Eckstein, 1981). The minerals trade also serves as an indicator of policy-- domestic and foreign--and performance alike. changing trade policies in China reflect shifting economic needs in different phases of the development process almost as a matter of course. rn this pattern, mineral movements, then, serve as tolerably-good indexes of domestic economic trends in China. Thus in the 1950s, when china's GNp was growi_ng very rapidly, 1,40 minerals trade T^ras expanding even more speedily. The dynamics of the trade' dominated as it was by the importation of petroreum and raw metal products, impried that the initiar period of china,s economic transformation required moïe mineral inputs into industrial growth, and the importation of key mineral products was very necessary when the domestic mineral industry was only at the gestation stage. Disruption of the sino-ussR relationship in conjunction with a series of natural disasters during the 1960s forced china to slow down its industrialization prograrnme. under the serf-reliance policy, minerals trade decreased in line with the cutbacks in total foreign trade. HoÌ,üeveï' some significant improvements regarding the domest'ic mineral industry T^rere achievedz one of which r,ùas the discovery and exproitation of crude oil in the northeast. During the 1970s, the deveropment of the oil industry galvanized the national economy. Fuïtheïmoïe, china became a net oil exporter after the mid-1970s. This development greatty reshaped the patterns not only of the minerars trade but also of foreign trade as a whole. on the one hand, crude oi]. emerged as the largest singre item in china/s set of exports. on the other hand, a ner^r surge of technology introduction, aimed at improving the utilization of crude oil, occurred. under the twin policy of ,,oil_
for-stee]-" and "oil-for-machines" . Thanks to the 'open Dooï' poricy, the r9g0s saw china becoming the fastest-growing economy in the fastest-growing region in the world. rn contrast with past practices, the chinese began to use L4L foreign trade as an instrument of the countryrs growth much moïe consciously. At the beginning, China continued the ,,oil_f or_ machines" and "oi'-for-steer" porÍcies, using them to justify the ever-growing revel of imports of prant and equipment. yet, confronted with instabirity in internationar oir prices, together with failure to increase oil ïeseïves and a strong domestic market, china began to change its foreign trade policy in the mid_1980s. Before rong, oil üras dislodged from its predominant position in exports, replaced by textiles and other manufactured goods. ïn the meantime, the goveïnment adopted a frexible import strategy both to enlarge the part played by low varue-added minerals such as iron ore and to reduce the sizes of high varue_added products like fabricated steel. These changes ensured that the country courd concentrate its limited foreign exchangre on the introduction of advanced sets of turnkey prant and equipment for both import_ substitution and export_Ied growth activities. so farr trüê have enquired into the rores of minerar deveropment in fostering the national economy in china. rt is demonstrabry the case that an eveï-growing mineral d.emand, an adequate minerar supply (mainry from domestic souïces) and an increasing foreign trade in mineral products aïe three of the chief determinants mourding the national economy. rndeed, arl the findings of the previous chapters endorse the fact that minerar activity can provide a country with a sorid basis for accererating its overall economic arowth' rt is the time now for the study to turn its focus to the contributions of minerar activity to regionar deveropment. L42 Examining the effects of mineral production on regional development will' thereforeT be the centrepiece of the remainder of this study. Ïn terms of the overall thesis plan, the next part is divided into three chapters dealing in turn with the mineral-dominant stage, mining-based diversifi-cation, and aggregate impacts and centre- periphery implications. Each chapter addresses one target, respectively the forth, the fifth and the sixth. chapteï v, lays the foundations for the entire regional focus. Appendix 4-1: Global Oil Fnice Trends
1987 US$/bbl
45.0
Crude oil prices (Arabian light)
1970 t97Z t974 1976 1978 1980 1982 1984 l 986 1988 r990 (year)
Sou¡ce: IMF Statistics, 1990 L44 CEAPTER V NMTNER.AL.DOMINAITTII THE STAGE
5.1 fntroduction Regional development typically is promoted by the ability of a region to produce goods oï services demanded by the national economy and to export them at a competitive advantage with respect to other regions. once a region (for whatever ïeason) gains an initial advantage over others, various forces tend to speed the growth process by "circular and cumulative causation,, and lead to the development of a "centïe-periphery" or,,heartland-hinteïland.,, structure- rn developing countries, "natuïa]. endowment,, is always regarded as a relíable source of the initial advantages for regional development. rn this sense, mineral export_dependent activity can provide the start for many production sequences and prepares the region for achievement of the "take-off,' point. The aim of this chapter is to test the generar hypothesis in it,s regional manifestation; moïe specially, it is to test the proposition that a nation immersed in the "minerar-dominant,' phase of overall economic development can capitalize on the mining sector in order to stimulate the development of certain of its regions. The nation in question of course is china, and the objective of the chapter is to accomplish the fourth of the targets set out in the first chapter.
one of the insights emerging from an examination of the history of chinese economic development occurs with the defining of "resource endowment" in a substantive sense. According to perloff L45 and Lowdon (1961) endowment is sirnpry the inventory of those natural materials that are required in some degree by the national economy responding to internal consumption demands and to its positi-on in international trade. As the requirements of the economy change, the composition of the inventory shifts, and in this sense "ïesource end.ov,rment,' is a changing concept crosely associated with the dynamics of economic arowth. rn most countries, there has appeared growing a independence of economic activity from a specific set of rocarized resouïce bases and a shifting to a reliance on other sets. The anstnrer to what constitutes 'ïesources endowment", therefore, is rooted in the determinants of final demand--consumeï preference and income distribution, as werr as foreign trade--on the one hand, and. in the current organization and technology of production on the other. As these variabres change, so will the content of ïesouïce endowment. clearly, then, it follows that as the composition of ïesource endowment changes, there will tend to be substantial changes in the relative advantag'es demonstrated by regions supplying materiar inputs (and services) for the nationar economy. The impact of these shift can be sketched in with broad strokes by identifying stage_by_stage what have been the "natural ïesouïces that count,' in the national economy. This requires us to tell again a familiar story, but with a special focus, that of the regions.
5.2 fnitiating t{evr f,ocation Patterns The agricul.tural. period. Before the mid-twentieth century, L46 t china s economy T,üas characterized by dualism; that is, it courd be said to revorve round a smarl modern sector based on foreign capitar and technology and a large traditional agricurtural sector which accounted for 90 per cent of its totar population and 60 per cent of its totar domestic product. considering such a pïe_ industriat economy on a comparative basis, china was at a high level of development by the eighteenth and nineteenth centuries; but it had achieved that lever long before and showed no signs of a qualitative shift to a more complex structure or to a higher rate of growth.
rn many T^rays the primarily agrarian economy of china was fully in keeping with a relatively low degree of commercialization and a limited use of money. consumption in the economy depended largery upon accumulated st'ocks. such inventories of grain and other food- stuffs ürere needed not only to meet inter-harvest requirements, but also to serve as a buffer against both natural and man_made disasters ' To seÏve such a function the endowment which counted in this stage TÂras arable land with its environmental comprements of climate and water, and this set up the conditions for regional growth. rt vras quite 10gica1, therefore, that the regional economies devel0ped in conformity with a certain archetype: a good riverine port as the nucleus of an agricultural hinterland welr adapted to the production of a staple commodity in demand in the national market. The growth potentiar of these nucreated. regions depended heavily on the extent and. "riehness' of the hinterland accessibre L47 to rivers. since good agricultural land was almost a free ïesouïce while labour and capital T,vere relativery dear, the expansion of production was effected by bringing more land into production and so extending the limits of the hinterland. Much of the early chinese history is dominated. by the great rivalries for control of hinterlands that emerged first along the vtei and yellow rivers (in the Northwest and the North) , then the changjiang (yangtze River) and the Zhu rivers (in the East and the South) and finally the Liao and the suonghua rivers (in the Northeast). The force of the outward push for land is suggested by the fact that the population of the country increased at least eight-fold between 1368 and 1937 (Fan Vten-J-an, 1968). By the latter part of the last century, China was 'draum' into the world market by foreign forces (Kemp, 1989¡ and ports, railways and modern factories l^reïe installed. HoT,rrever, China T¡ras still a preponderantly rural and agrarian society in the I940s while the small modern industrial sector r^ras found as enclaves in the few areas of the treaty ports and the colonial frontier--Manchuria (the contemporary Northeast China¡--and r^ras ïesponsible for only limited spread-effects in the rest of the country (see Appendix 5-r for a discussion of how minerals influenced colonial frontiers in China). Th.e growth of mineral-based economy. Somewhere around 1950 the next important ïesource stage began as an aspect of the emerging minerals -dominant economy. The ambitious industrialization resulted in new input requirements: accord.ingly, a neltr set of L4B resources became important and a neT,rr set of location forces came into p1ay. The first part of this period r¡ras dominated by the growing demand for coal, iron and steel and by the rapid introduction of their production technotogy. At this point it was geographical the juxtaposition of coar, iron oïe, and the market which afforded the greatest impetus for growth. The importance of minerals, unlike agricultural land, did not 1ie so much in their direct contribution to regional growth but rather in the nature of their linkages with succeeding stages of production. rt was not so much the mining of coal and iron that was important for growth, as the making of iron and steel products; a pïocess which could not be separated from the sources of its mineral inputs. The early concentration of intensive coal-consumption industry (such as the por¡rer industry and aruminum-refining industry) and. steel-making in the central area of Liaoning (as outlined in Appendix 5-1) occurred as a result of these relationships; for this aïea was not only we1l endowed with rich deposits of iron oïe and coal but was also central to a spatially-concentrated, enlarging market. During the entire decade of the 1950s, f or example, 3 g ner¡r cities hreïe constructed (see Table 5-1), 18 of which T¡reïe recognized as truly new cities as they had no historical antecedents as county seats or rural market towns. Most of the new cities rareïe built as mining centres in attempting both to overturn the spatial imbalance of industrial development in favour of the coastar areas and to bring industriar activity closer to eneïgy sources and raw materials (see Table 5-2 and Figure 5-1). v4lith a continuing increase in the demand L49 for al1- types of mineral resouïces' the depretion of accessible ore deposits in the coastal areas, and. the westward penetration of the railway network, a neT,rr role in regional growth was played by
Table 5-1 New cities Developed during the r950s Nature of development Municipalities Industria]- towns Total New1y built 13 25 3B Large-scale expansion 46 General expansion 6 52 61 ]-20 1_81 Source: Chang Sendou (Ls7 6) "The Changing System of Chinese cities", sof Assoc of s pp.39B-415.
Tabre 5-2 Major function of Newry-Devel0ped cities, 1950-60 Major fnner Heilong- function Mongolia Xinjianq jiang Henan Sichuan Anhui ,fi]-in Hunan Total CoaI mine 4 oil fie].d I 10 ïron ore mine 2 lumber industry I 3 EydroeJ-ectricitv t_ Railway terminai I 1 Total 4 I 1B see Table 5-1.
mineral resources end.ourment. rn the mountain regions stretching from the western edges of the great prains to the northwest and the southwest provinces' it was the mining activity which was the lead factor in economic development. A further examination of the urban development in china may shed 1i9ht on the significance of the growth of a mineral-based economy during the past 40 yeaïs. According to the chinese statistics Bureau, there r^reïe 467 cities in china in 1990, and of these, L62 or some 35-0 per cent of Èhe totar, owe their economic City's principal Function
coal Indusky O e Railway Teminal
@ cruae oit O Lumberlndusrry
Ircn ad Sreel € Industry @ Hydropowe¡ g____ry____3or*
0 44O km
Figure 5-1. Eighteen Newly-Built cities of china in the 1960s 1-51 development, whorly or in part, to mining activities (see Table 5_ 3) ' rn other words, the penetration of industrialization into most rural areas of china during the past forty yeaïs was red by the mineral sector and closery associated with Ít were major changes in urbanization, particularry in the interior aïeas (see Figure 5_zl. some important points can be drawn from Table 5-3. ïn the first place, the metal mineral sector has been more significant (44 ferrous industrial towns plus 59 nonferrous industrial towns) in terms of geographical spread than has the erÌergy paït of the industry (48 coal industrial towns plus lt oi]- industrial towns) in the country as a whole. Secondly, the contributions of the minerals economy to regional devel0pment favour the energy sector (34 peï cent for coar and 53 peï cent for crude oil in aveïage weight¡ rather than the metal portion of the mineral industry (27 per cent for ferrous Índustry and 19 peï cent for non-ferrous industry in average weight¡. Thirdly, the overall regional effect of mining development varies, therefore, in proportion to the pïesence of the coal branch, iron and steel branch, nonferrous branch and the petroleum branch of the minerar industry. Finally, the hinterland, with a share of 70 per cent of the L6z cities, is much more inclined to host mining towns and cities than either the coastal areas or the northern heartland. Development of mineral activity contributes not only to the growth of local economies but also to the amending of the spatial economic system of Èhe country as a whole. By the lights of the Pranning commission, for exampre, "4""a" the vast territory of china o\ o\
v)
tw. ¡
q)¡r âg Ér
q)
I
Li 0) Å= N rnI 0) ¡i â0 153 Table 5-3. Cities' Econony Dominated by ttlning Activities China, 1990 in
Major mineral índustry and "r""t""" ]- Tota1 Eebei ( I0-43e.) L (34e., - 2 ( 50_ 84e.) 1_0 Shanxi 3 (L2- 43e., 2 ( 4-9"-.1 Inner 6 (L7 -66"-") - 11 Mongolia 2 (24-36--"1 4 (19-88e.) (7 I,iaoning 5 ( 10-14e") L 2"-") 7 3 ( 9-20e") 4 (32-7 6"-.') I ( df_ran 2 (9- AOe.) 2 (6-L]-e", 78e") t_3 Eeilong- 2 (L9-22"-"1 -6 j iang 13 - 15 e.) 2 (5 -24"-.1 s ( 7-93e.) L (7 4.-") 10 Shandong 3 (7 -L5"-") 4 (LL-46e") I ( 95e") B iliangsu ( 10e") 4 ( 5-9e") 2 ( 11-18e") B Zhejiang 4 ( 10-36e.) 4 Anhui I ( 66e") 3 L2-39e") 2 (23- 4L.-", 6 ,Iiangxi 3 23 5'-"1 -7 2 (20-44e", 5 Fuj ian 1 ( 9e") l_ HenaD 2 27 -85'-") 5 (4-L7'-") 6 (11-88e") 1 (7 5e") L4 Eubei 2 29- 44>") 5 (4-20'-") Hunan 7 5 (5-63e") 2 (9 - 23e", ( 32-35e.) Guangdong t (2O""1 9 I ( 8e.) 2 Guangxi l_ ( 10ø.¡ I (4Le"l 2 Sichuan 5 (9- 68"-.1 4 (s-7.-.) 2 (6-_L4e"l 1 ( 14e.) L2 Guizhou 2 ( L4 - 39"-.¡ t, 3 ( 6- 1l_e.) 5 Yunnan 3 rL-7 4e", 1 (20"-., 4 Shaanxi I ( 10e") 2 ( 6-Be") 2 (26-30"-"') 5 Gansu 5 (2-_98e", Ningxia 1 ( B8ø"¡ L (7 B'-") 7 1 (28e") Qinghai L (27.-.) I - 1 Xingjiang 2 (4-15e") I ( 16ø.¡ I (52"-"1 4 Tota]- 44 ( 9--85e") 59 (2-98e", 4B ( 6 - 93e.| 11 ( B- 95e.) L62 Average weight (27 "-", ( 19e.) (34"-.) ( 53 ø.¡ The whote cou¡ttry ( 8e") ( 3e") ( 2e.l ( 3 e") 467 Source: China's statistics Bureau (1991¡ china's urban statistics yearbook, Chinat s Statistics press. Note: rr one of the two cities, Iiupanshui, is also a coal_mine citv. L54 can be delineated into three zones: the Eastern, the Middle, and the vtestern. This crassification basicalry reflects the major spatiar disparities in sociar and economic development across the country and constitutes the framework for the strategic alrocation of national construction (Tables 5-4, 5-5 and 5-6). The Eastern zone with a population of over 400 milrions had already emerged as the industrial central aïea in china since the I-950s. rt would be hard to imagine the zone's growth without mineral input from other areas' According to the state statistics Bureauz about one-fifth of the whole output of china's coal-mining was shipped to the Eastern zo}re each year during the 1980s. The effect T¡ras reciprocal: the Eastern zon'e stimulated expansion of mining industry and the growth of the supplier regions while access to minerar products for industrial consumption herped to sustain the zoners growth. rn effect' the rapi-d expansion of manufacturing activities in the metropolitan areas of the Eastern zone can be imputed to the input of mineral and primary commodities from the Middle and lvestern Zones' rn the meantime, oveï 33 billion yuan of capital investment, millions of tonnes of industriar equipment and nearry 5 milrion technicians and skilled workers frowed into the Middle zone and the western zone. using this evidence, it can be argued that the growth of the centre-periphery structure d.epends on the medium of spatial organization: in a word, it hinges on interaction. The various kinds of movements, flows and transactions between regions and cities are the expressions of input-output rinkages, trade relationships, and arl interdependencies within the spatial 155 t"b t-t patterns of population " ""rional in china I Lgs2-go (e.) Area 9gp!¡1ar+9!_ Urban population NT L952 1990 L952 1990 L952 I_990 The Eastern L4.3 40. B 4L.3 53 .1 45.7 49 .8 53.5 The Middle 29 .4 33.5 35.8 28.8 36.2 The Western 56.3 34.L 30.3 22.7 22.9 18 .1 18 .1 16.1 L6 .2 Source: Chinats Statistic Bureau Note: Nl=National Income . Note3 see Appendix 3-2, p. 110.
Table patterns 5-5 Regionar of rndustrial Endowment in china, L952- 90 ( e.) fndustria]- employment fndustria]- output 1952 1990 L952 1990 The Eastern 5s.9 48 .6 69 .4 60 .7 The Middle 3L.7 35.5 The Western 2L.8 26.3 12 .4 I_5.9 8.8 13 .0 Source: see Table 3-3, p.1ll.
Table 5-6 patterns Regional of Stap]-e Commodities in China, 1952 -90 ( e.) Crude Oi]- CoaI Zone lron SteeI L952 1990 1952 1990 19Ð 1990 L952 1989 The Eastern 53 .7 42.7 40.4 22.0 79.2 54.4 85.9 58.0 The Middle L.4 49.8 50.6 58.2 13 The I¡Iestern .6 32.2 10.3 30,0 44.9 7 .5 9.0 19.8 7 .2 13 .6 5.8 L2.0 Source3 see Table 5-4.
economic system of a country as a whore. rn the context of mining exploitation, therefore, the mineral input-output rerationship reduces to an appreciation of the supply flows to the manufacturing and service heartlands or centres. By way of contrast, growth of the heartlands or centres is partry incumbent on suppry to the peripherar regions of technorogy, equipment, information, capitar 156 and other inputs of the business and personal services kind. ïn other words, developments of both regions are mutualry reinforcing, providing a latent market from which arl can benefit. rt is possible to regard the changing pattern of regional development in china in terms of the 'internal' characteristics of the region as well as in respect of its attractiveness for exporx industry (those products intended mainly for markets outside the region) - a region's growth, according to the tenets of export-base theory, typically has been promoted by its ability to produce export goods or services demanded by the national economy, and to export them at a competitive advantage with respect to other regions- Thus, the metar deposits of the mountain provinces, the Northern coar and the Northeastern oil ï^reïe regionar ,,expoïts, triggering development. But theory is silent on the critical issue of specifying the initial force governing take-off when all other internal conditions are ready for development. This compers us to revert to an investigation of the sources of growth.
5'3 Mining and Regionar Growth: the initial impetus The most sing]-e important factor: investment. There is a widespread berief that the souïce of growth resides in three factors: rand (natural ïesouïces), labour and capital. According to chenery and Robinson (1986), the contributions of these three factors to regional economic arowth are veïy different at dj-fferent stages of regional development. rn their comprehensive analysis they found that, firstly, the growth of capital is the most L57 important sÍngle factor, but that its relative contribuÈion is reduced from over 50 per cent of average growth at the earry stage of economic deveropment to 30-40 peï cent at subsequent stages; secondly, the growth of the labour force is no longer statistically significant in many developing countries as is testified by the existence of surprus labour; and, thirdly, the rearrocation of capital and labour from agriculture to more productive sectors accounted for about 20 peï cent of aveïage growth. ït is true in the real worrd that the generar rate of regional deveropment is always limited by shortage of factor inputs. Nevertheress, if any one scarce factor associated with underdevelopment should be singred out, it must be capital investment. The first goal of development programming in developing areas is, therefore, to find the best way, either from inside (domestic saving) or outside the area (foreign assistance), of breaking the vicious circle between capital shortage and underdevelopment and to design the most efficient and optimum rate of capital accumuration. Minerals and investment. Minerals may serve as a substitute for capital when it is recorrected that there is a degree of substitutability among factors of production. Minerals in the ground can be seen as a base for raising capital from the outside simply because of the uneven nature of their distribution and the increasing demand for their utilization. rn this sense, then, the more mineral ïesources possessed by a regÍon, the stronger is its bargaining poT¡reï and the greater aïe its opportunities to absorb capital from the outside. The data shown in 158 Table 5-7 underline the regionat effects of mineral resouïces in the industrial investment of china during the 40 years in which the growth of a minerals-based economy vras given prominence. The evolving pattern tells us something of how the regions reached their present resource relationships. During the plan, First Five-year much attention T,vas concentrated in Northeastern chinar particularly in Liaoning and Heilongjiang provinces which hrere rich in metar and coal resources' other important provinces like shanxi, Hebei, Henan and Gansu' also received large investments due to their abundant mineral resources--coal, crud.e oil and bauxite. The onry exception in this period was shaanxi, wheïe industria]- investment was used for the construction of a large textiJ.e industry instead of tapping its latent minera]- wealth. Between 195g and 1g65 (the second Five- Year Plan and the Three-Year consolidation phase), there T^ras a decrease in the proportion of the tota]- industriar investment steered into the Northeast. This was in response to the poricy of industrial decentralization on the one hand and the encouragement of steel-making at all costs during both the Great Leap Forward and its confusing aftermath on the other. That said, the Northeast still retained its premier position in attracting industrial investment. Howeverz noTrü crude oil exploitation made Heilongjiang replace Liaoning as the biggest provincial recipient in the country with a share of nearly L2 per cent of the total industrial investment. The rarge scale of exproitation of metar and energy resources in the western part of sichuan province established that 159 Tab1e 5-7 A Change pattern of fndustrial- fnvestment in the State-Run Enterprises of China, by Province, 1952-I_990 ( e.)
Province 1 FYP 2 FYP 63-65 3 FYP 4 FYP 5 FYP 6 TYP 7 FYP Total Beijin I_. 96 2.24 2.67 2.46 3.22 4.LO 2 .63 1. B6 2.52 1B Tianjin L.37 L.75 L.73 L.74 Eebei 2.6L 3.64 2.32 1. 09 1. 91 24 5 .11 5.06 3.39 3 .10 4.t_l 5.96 Shanxi 4.LL 4.44 4 .52 11_ 6.24 5.1_6 4.L4 4 .Os 3. B9 3.72 5.78 4.77 fnner Mongol. 1.55 3.98 3.82 4.72 B 2.70 2 .L5 2 .44 3.35 2.6L 2.77 L7 f,iaoning L9.96 8.96 7 .47 4.07 7.7L 8.33 6.04 7 .36 7 .56 ili]-in 7 .56 3 .L4 4. 59 2.50 I IleiJ.ongjiang 2.83 3.32 2 .65 2.3L 2 .8L L4 L2.54 B. 14 11. 87 6.30 5.s2 5. 86 Shanghai 6. 96 6. 1B 6 .64 3 2.4L 3.88 4.13 2.75 3.69 4.03 ,Iiangsu L.79 10.07 7.79 6.42 4 3.40 2.93 2.07 2.90 4.54 5.04 5.94 zhejiang 0 .90 2.73 1.84 1.s6 4. 68 9 Anhui L.44 2.LO 2.23 2.37 2.L4 20 2.L5 3 .45 3 .29 2 .L4 2.87 3.02 3.02 Fuj ian 0 .68 2.81 2. B8 13 2.02 2.29 t_.31 1. 69 1. 40 1. 68 2.58 iliangxi 2 .32 2.32 2.09 2.OO 23 2.6L 2.37 1.81 2 .52 L.7 5 2 .07 22 Shand.ong 2.77 3.76 s.26 3.83 4.58 2.87 Henan 4.27 5.24 4.73 4.90 7 .57 5 .44 6 3.92 5 .L7 4 .45 4 .65 4.3L 4. 53 IO IIubei 3.38 4.88 3.0t_ 6.45 7.3s 8.76 Hunan 2.06 3.74 3.00 4.83 3 .44 5.08 4.22 3. 84 2.88 2.29 2 .37 2. B0 Guangd.ong 1. 93 3 .L7 2. 15 81 2 .50 3.25 3.25 4.6L 8.29 5 cuangxi 0 .65 L.4L L.43 .44 5 2.02 2.LO 2.LO L.44 1_. l_B 1. 51 Eainan 0 .00 0.00 0.00 0.00 0.00 26 Sichuan 4.38 6.97 0.25 o .47 o .62 0.36 29 9.57 L4.89 9.79 6.25 4.79 5 .66 6.73 Guizhou 0.33 L.76 2.04 4.74 3.03 2.L3 2 Yunnan 2.03 1.55 L.4L 1. 9I_ 25 3.A2 3.31 3.55 2.88 2.46 2.LL L.4L 2.L3 Xizang 0.00 0.00 0.00 0.00 2L Shaanxi 0.00 0.15 0. t_5 0.15 0.11_ 30 s.27 3.36 3.05 4.23 4 .L6 3 Gansu 4.34 .43 2.84 2.64 3.L7 t2 3.6s 4.63 5.77 4.02 2.27 1. 93 2.L9 2.78 Qinghai o.22 0. 34 0.48 1.53 16 Ningxia 0.98 L.46 1. 61 1.36 L.28 27 0 .07 0.45 0. 65 L.2L 0.80 0.81_ xinjiang r.75 L.7L 1.80 0.61 0. 86 o.77 2B L.74 1.01 2.20 2.BO 2 .67 2.29 l9 Total 100.00 100.00 100.00 l_00. o0 100.00 100.00 100.00 r00.00 100 . 00 Total (bil-) 23.26 69.63 20.03 53.20 97 .66 L2L.70 154. 06 37L.7L gLL2 -37 source: chinats statistics Bureai and Sta!.istics yearbook, 1991 china Note: R=ranke._ I_60 province in first place oveï the duration of the Third Five-year Pran' position a it retained through the period of the Fourth Five- Year Plan as well. The most significant improvement in the rifth Five-Year Plan period was achieved by Hubeir âs its iron and steel industry T¡ras consoridated during this time. rt was ecripsed by shanghai in the sixth Five-year plan period, however. As the largest introduced industrial project (staïted up Ín December L97B) the Baoshang | rron and steel Factory had been atlocated cg L3-48 billion in investment by the end of 1985; that is, a sum equar to 30'7 per cent of shanghai's tota]- industrial investment in this period. only in the recent five-year pran period has the general pattern of industrial investment in china began to change, exhibiting a declining relative allocation in mineral exproitation in proportion with the rising economic development in the coastal areas, particularly those in South China. Generally speaking' the pattern of civil industrial investment in the past r4ras rargery dominated by minerars activity, and. this phenomenon can be styred a minerar-oriented investment phase. There are eleven chief provinces, each with a share of more than 4 per cent of the total industrial investment. rn combination, they accounted for more than three-fifths of the total industrial investment taking prace in china between Lg52 and 1990. Eight of these, namely, Hebei, shanxi, Liaoning, Heirongjiang, shandong, Henan' Hubei and sichuan, are heavi]-y retiant on minerar-oriented industrial investment; reaving onry three, that is to sây, shanghai' ,Jiangsu and Guangdong, that courd point to activities 161 other than those of a mineral-orientation for deveroping their local economies. Comparing Table 5-7 with the four Tables 5-B to 5-1I, one is led to conclude that two characteristics of mineral exproitation are very important if regional development based on 'expoït_ orientation' is both to be achieved and sustained oveï the long run' Firstly' the regional minerar endou¡ment in terms of the numbers of the key mi-nerals is the single most important determinant factor in the pattern of industrial investment. The more types of minerals the region can lay claim to, the moïe investment it can command. Liaoning is the ',biggest brother,, in mineral production, and its abirity to attract industrial investment is the most terling, not just among the group of eight largest mineral producers (provinces) but also in the countïy as a whole' thanks to its ovmership of three key minerals¡ iron ore, coar and crud.e oiI. sichuan, Heilongjiang and shandong, ranking as the second, third and fourth producers of the minerar provinces, each enjoys two key minerals of its owns crude oil and coal for Heilongjiang and. shandong, and iron ore and coal for sichuan. The remainder of the minerar provinces mainly rely on onry a singre mineral product to attract outside industriar investment; for example' shanxi and Henan depend on coal, Hubei reries on iron ore and Hebei is reliant on crude oil. secondly, large scare is arso crucial and this is the advantage of coar. rt is a regurating factor in the transformation of shanxi into the biggest coal producer in china. rn fact, no other province relying onry on a L62
Table 5-8 A change pattern production of Newry-added capacity of coal in the state-nun unterpii".=-of-china by Provinces, L9S}-}O ( e.) , Province 1 FYP 2 FYP 1963-65 3 FYP 4 FYP 5 FYP 6 FYP 7 FYP Beijin 2.24 2 .64 1. 39 0.43 t_.1_5 0.00 O. I-B Tianjin 0. 00 0. 00 0.00 Eebei 0.00 0.00 0.00 0.00 0.00 0.00 8. 08 9 .52 9.79 5.22 Shanxi 15. 3 .64 3 .23 5. 91 4.64 20 8. 50 9.74 8.10 10 .23 L2.OL Inner Mongolia 1. 55 2.48 24.39 28.58 4.87 5.31 1. 61 2 .63 liaoning 10. 7I_ 11.09 4.75 6 .87 15. 59 4.L6 5 .65 6. 65 4.59 ¡ilin 5. 66 s. 83 7 .38 6.13 L.78 4.2L 4 .02 f,. )5 Eeilongjiang L2.39 7 .LT 2.99 Shanghai 4 .7I 2.26 5 .13 5. 54 5.29 I0.38 0.00 0. 00 0. 00 0.00 0.00 ,Jiangsu 0. 56 0. 00 0.00 0.00 3 .62 3.20 2.70 2 .46 L0.72 zhejiang 0. 00 L.23 3. l_8 0.31 0. 00 0.30 0.31 0. B2 Anhui 7 .59 0.00 0.38 3.74 6.96 3.83 2.77 L.94 8.54 Fujian 0. 03 0. 06 3 .61 2 .4L 1_. 00 3.32 2 .28 0.59 .liangxi 2.67 1. 96 L.67 6.32 0 .66 Shandong 3.31 L.7 0 1. 19 L.7 0 1.35 L0 .23 3.48 L.52 6. B6 5.33 9.93 Henan 6. 03 14. 01 10.35 Eubei LL.37 6.46 10.73 10. 93 8.01_ 5.26 0.03 0. 03 1_.39 1.58 L.7L 2.LL Hunan 2 .5L 3. 01 0.68 o.29 Guangdong 3.34 10.87 3.88 2 .53 L.99 L.62 0.72 0. B3 0. 56 2.39 Guangxi 0.50 3 .56 L. s7 0.37 0.55 L.24 0.00 L.43 2 .84 4.L4 Hainan 0.00 0. r. 07 0. 66 Sichuan 00 0.00 0.00 0.00 0. 00 0.00 o.02 3.56 7 .04 7 .s2 8.92 8.60 4.L4 Guizhou 0 .22 3. I_0 3.88 2.L2 1.90 7.00 6. 90 o Yunnan L .27 .46 1.4I 1.56 o .37 L.67 L.49 1.53 1. 93 0.15 Xizang 0.00 0. 00 1.56 0.00 0.00 0.00 0. 00 0.00 Shaanxi 1.33 2 .55 0.L7 Gansu 2.46 6.06 3.50 r0.77 2 .55 L.44 2.92 L.25 0.00 2.73 3.03 Qinghai 0. 91 L.7 6 1. 00 3.48 Ningxia o .22 0.00 0.56 0.85 0.79 0.00 0.36 0.00 2 .85 0.00 3.50 Xinjiang 0.00 4.30 0 .46 o .37 0.64 I_. 34 0.00 4.06 0 .18 2.05 0.26 0.24 Tota]. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Total (niJ. r) 63.76 96.76 2I-55 69.15 81.21_ 64.93 8L.27 L26.34 Source: China's Statistics Bureau, cs and L63 Table 5-9 A change pattern production of Newly-added capacity of crude oil in tJre State_Run rnterpiises of Chj.na, ;;- p¡ovinces, 1952_90 (%) Province 1 TYP 2I'YP 1963-65 3 FYP 4 TYP 5 FYP 6 FYP 7 TYP Beijin 0.00 0. 00 0.00 0.00 0 .00 0.00 Tianjin 0 .00 0.00 0.00 0. 00 0. 00 5.60 9 .40 L.47 3.7L Eebei 0 .00 0.00 3 .92 0.00 0.00 o .62 44.78 9. 11 2 .85 Shanxi 0 .00 0. 00 0. 00 0.00 0.00 Inner Mongolia 0.00 0.00 0.00 0.00 0. 00 0. 00 0.00 0.00 0.00 0.00 Liaoning 0 .00 0. 00 0.13 0.00 1.08 7 .90 LO.L2 LO .47 L4.37 ,fiIin 0 .00 o .37 0.25 5.46 Hei1-ongjiang 22.98 0.81 I. 54 2.7 4 0 .00 49 .66 88.20 57.82 45.34 L4.82 34.46 Shanghai 0 .00 0. 00 25.27 0.00 0.00 0.00 0. 00 0.00 ,fiangsu 0 .00 0. 00 0.00 0. 00 0.00 0.00 0. 63 0 zhejiang 0.00 0. 00 .47 0.64 0. 00 0.00 0 .00 0. 00 0.00 Anhui 0.00 0. 00 0. 00 0.00 0 .00 Fujian 0.00 0 .00 0.00 0.00 0 .00 0. 00 0. 00 0.00 0 .00 0.00 0.00 .Iiangxi 0.00 0. 00 0. 00 0 .00 Shandong 0.00 0 .00 0.00 0.00 2 .87 0.00 0. 00 7 .4L l_9. 15 29.30 Henan 0.00 14.06 24.5L 29.22 0.00 0.00 0.00 0 .00 s.76 L2,06 Hubei 0.00 0. 00 B .44 0.00 3.61_ 1.08 0. 00 0.30 Hunan 0.00 0. 00 0.20 0. 00 0.00 0.00 0. 00 0.00 0.00 Guangdong 0.00 0. 00 0.00 0.00 0.00 Guangxi 0.00 0. 00 0.00 0.00 0. 00 0. 00 0.00 0.00 0. 00 Hainan 0 .00 0.00 0.00 0.00 0.00 0.00 0.00 0. 00 Síchuan 0 .00 0.00 0.00 0.00 0.00 0.15 0.23 0. 00 Guizhou 0.00 0.00 0.00 0.00 0.00 Yunnan 0.00 0.00 0.00 0.00 0.00 0 .00 0. 00 0.00 0.00 0.00 0.00 Xizang 0 0.00 0 .00 .00 0. 00 0.00 0.00 0 .00 0.00 Shaanxi 0 .23 0.00 0.00 0. 20 0.03 0.03 0 .06 0. 04 Gansu 85.37 L2.L7 o .23 o .47 0.00 0.70 0 .07 0. 83 o.2L o.02 Qinghai 0.00 9. 61 0.58 0.54 0.26 Ningxia 0.00 0.38 0.00 L .34 0. 00 0.00 0.00 0 .00 L.42 0.00 0.00 xinjiang L4 .4L 28. 00 3.53 85 5. 3.20 4 .87 5.00 7 .52 Tota]- 100.00 100. 00 100.00 100.00 100.00 100.00 100.00 100.00 Total. (nil- r) 1. 3I_ 8.16 6.75 27 .67 40.65 39.4L 49.76 25.L6 Source: Chinars Statistics Burealr,. a.rd . L64
Table 5-10 A change pattern production of Newry-added capacity of rron ore in the state-nun unterpiises of china, by Provinces, 1952-g5 ( e.) Province 1 FYP 2 FYP 1963-65 3 FYP 4 FYP 5 FYP 6 FYP Beijin 0.00 3.81 Tianjin 0. 00 9.18 1_8.53 16. 69 5.22 0.00 0.00 0. 00 0.00 0.00 0.72 Ifebei 3 .82 12.13 0.00 Shanxi 3.95 6.60 7 .4L 18.36 0.00 0 .00 0. 05 0. 00 0.00 L.24 I fnner Mongolia 0.00 0.00 .54 L6.4L Liaoning 0.00 L.L2 L.92 2 .38 L.L2 77.09 27 .59 65.79 15.50 31.00 10. ,rilin 0.00 0.00 01 18.64 Heilongjiang 0 . 00 t_. l_1 L.92 2 .38 L.L2 0.00 0.48 0. 00 0.10 L.20 0.38 Shanghai 0.00 0.00 0.00 0.00 0.00 0 .00 0. 00 0.00 ,fiangsu 4.68 0.00 4.28 0.30 zhejiang 0.00 9. B5 0.33 29 .83 L.24 0.00 L.24 0.81_ 3.05 0.7s Anhui 3 .60 3. 09 0.00 LO.62 Fuj ian 0.00 3.I_6 5.72 7 .46 0.7L 0.00 0.87 0.70 0.00 0.00 ,fiangxi 0.00 0. 95 0. Shandong 00 0 .82 0 .65 5.2s 0.00 2.L6 4.L9 L9.4L 0. 82 2.0L Eenan 0.00 4.28 6. 15 0.00 Eubei 0.00 1.36 1.48 0.48 0.00 0. 00 16. 1_8 0.00 5.88 4.23 Uunan 0.00 3.39 1.19 0. 00 0.00 1.59 2.L4 0.81 0.00 Guangdong 8.65 3.33 0. Guangxi 00 0.99 1. B1 10.59 8.20 0.00 0. 00 0. 00 3 .10 Hainan 0.00 1. B5 0. 05 4.10 0. 00 0. 00 0.00 0.00 0.00 0.00 Sichuan 0.00 2 .62 Guizhou 4.93 18.38 0.59 3.20 0.00 0.00 0. 00 L.64 0.99 0.00 Yu¡tnan 0.00 0.00 L.L2 L.28 0. 00 0. 86 3.34 0. 00 Xizang 0.00 0. 00 0.00 Shaanxi 0.00 0.00 0.00 0. 00 0.00 0.00 0. 00 0.00 0.10 1.33 Gansu 0.00 0. 05 3.73 0. 00 0.00 7 .94 4.36 0. 00 Qinghai 0.00 0. 00 2.24 Ningxia 0.00 0.00 0.00 0. 00 0.00 0 .00 0. 00 0.00 0.00 0.02 0.00 Xinjiang 0 .00 0.00 0. 00 0 . 00 L.24 0.09 o.72 0.00 Tota]- 100.00 1_00.00 100.00 100. 00 100. 00 100.00 100.00 Total- (nil- t) 13.88 2L.02 3.04 40 -32 45.87 20.97 13.41 Source: China's Statistics Bureau, ( 19s0_85 ) . 165 rabre 5-t-1 A change pattern production of Newly-added capacity of steel in the state-nun unterpii="=*oi cni,,, by Provinces, t_952-85 ( e.) ,
Province 1 FYP 2 rYP 1963-65 3 FYP 4 TYP 5 FYP 6 FYP Beijin 0.00 2.23 39.11 4.37 0.59 Tianjin 0.07 0.00 0.00 4.25 0.00 L.62 0 .00 0.00 0.00 Eebei 3 .48 5.L4 1. 56 2.06 L.22 24 .87 0.00 Shanxi 2.87 2.74 0.00 9.00 Inner Mongolia L.27 2.92 0.00 0.00 9. 58 0.00 13.65 0 .12 liaoning 74.40 9. 86 0.00 ,IiIin 17. B1 2 .6L L2.40 3L.78 2.28 0.00 0.00 0.51 0.00 L.7 3 1.31 Eei].ongjiang 6.31 L.20 0.00 0.00 0.00 0 .67 0. t_7 L.20 Shanghai 5.38 19.91 0.00 ,fiangsu 0.00 13.06 3.73 0.00 0.00 0 .00 1. 81 1.30 0 .14 6.11 o.L4 Zhejiang 0 0.00 .00 0.16 9.26 o .49 0 .14 0. 86 ^Anhui 0 .00 0.00 Fujian 1. 99 35.85 2.86 0.87 LO.29 0.00 0 .00 o .42 1. 69 0.69 0.36 4.03 0.00 'Jiangxi 0 .00 L.92 2.6L 2 .65 0.05 L.37 0.00 Shandong 0 .00 2 .83 0. 00 Henan 5.86 0 .93 0. 00 0.00 0.00 1. 70 0. 00 o.L2 Eubei 2.58 4 .87 0. 00 0.00 22 .00 0. 00 7.09 5.68 26.s7 0.00 Eunan 0 .00 o .64 0.00 4 .84 7.48 0. 00 0.00 Guangdong 0.00 o .97 0.00 Guangxi 3.20 2.99 0. 00 40.00 0 .00 0.00 0. 00 2 .56 3.24 Hainan 0.00 1. B9 0.00 0.00 0. 00 0.00 0.00 0. 00 0.00 Sichuan 4.30 1. B5 0. Guizhou 13 4 .89 22.90 B. 66 0.00 0.00 0.16 3.91 o.76 0 .00 Yunna¡l 0.00 0. 68 0.00 1. 06 L.96 L.92 l_.95 0. 00 60.00 Xizang 0.00 0.00 0. 00 Shaanxi 0. 00 0 .00 0. 00 0.00 0.00 0.00 0.00 0.07 L.7 5 Gansu 0.00 0.07 0.00 0.00 0.00 0.08 0.00 L.7 2 Oinghai 0.00 0.00 0.00 Ningxia 0.00 L.37 0 .51 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Xingjiang 0.00 o.07 0.00 o .32 0.00 0.55 0.00 0.05 0.00 Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Total (nil. r) 2.79 9.39 o.77 7 .28 5.90 5. 83 0.30 Source: China's Statistics Bureau, (19s0_85). L66 singJ-e mineral resouïce can compete with Shanxi in attracting prodigious amounts of industrial investment.
5'4 ltineral Production and Regional Factor Development: A Fundamental A key precondition for development. Economic deveropment, even at the simplest lever, must create a movement of goods and persons from one place to another. The mining industry, both in its role as a vital part of economic activity and a dealer in commodities of grreat bulk and row value per unit weight, is arways regarded as one of the most powerful agents for improving the spatiar flow of goods and' on that account, promoting regionar deveropment. rndeed, there is little doubt that mining industry can make its greatest contribution to the ratter by disrupting the consoridation of centre-periphery structure; an action brought about through the outward orientation of its transport infrastructure. Arthough the first railway rine furry opened to traffic in china (built compretely by British capital) dated from lBBr, chinats transport system was marked by extreme backwardness before L949 rn - fact, at a density of 2.3 kirometres (km) of rairways peï thousand square kirometres of territory, china T¡ras ress well provided with transport facirities than any other rarge country in the world' There was a particularly marked dichotomy between the few areas of ready accessibility and the vast aïeas of limited or no accessibility and about 60 peï cent of the totar zL,Boo km of railways of different gauges and types rveïe concentrated in Northeast china and along the coast. More specificarry, moïe than L67 50 per cent of the provincial capitals had no rair connections with the national capital--Beijing (see Figure 5-3). Also, in Lglg there were only 80,768 km of highwâys, a network which was characterized by roads with little oï no surfacing and by bridges and ferries of low capacity. rn addition, there T¡reïe onry 73t6L5 km of navigabre inland waterways in china in Lg4g despite their historical and geographical significance' and many rivers lqeïe still in their natural states with a depth of less than one metre, rendering thern useless for commercial traffic on any scale. This aggregate transportation network in china was the result of long historical development where the area of greatest transportation accessibilíty became the coïe oï centrar area. The accessibirity of this earry core area T'üas further reinforced by the coloniar establishment of trading ports. since the puïpose of a substantial paït of the transportation network was to meet coronial needs and goars, it is hardly surprising that the resurting network T¡ras not geared to national needs of spatial integration which would have linked together the deveropment aïeas and exproited to the full the potential of the interior. Development and the changing pattern. To connect the four corners of a country as vast as china requires enoïmous efforts. The new goveÏnment of Lglg attempted to accomplish the task through investment in a combination of modern and traditional transport modes. rn this effort, the modern transport sector is the moïe powerful instrument in lending support to china's mineral-based industrÍalization. The chinese government invested moïe than cy 220 Q Nuionutcu¡ut Rdlwsy \l - O PmviEi¡t C¿Êrrt Ciri6
O OtlEr MJbr pot 0!@æb
Figure 5-3. Railway Network in China, 1949 169 billion in the transportation sector between 1953 and 1990, a total second only to the amount found for industrial investment. As a resurt' chinars modern transportation system has shown remarkable growth since 1950 (see Tab1e 5_t_2). The first target of this deveropment is to build up an integrated network to connect the minerar-producing and mineral- consuming areas. Based on location patterns of minerar resources and regional development (see chapter rrr), expansion of the inland transport system was given a high priority before the mid_ L97os, and this applied particularly to the railway system. rn the First Five-Year Plan, for example, the important 7¡eng2,,ou-Lanz¡ou rail line from the capital of Henan to the capital of Gansu received attention so that it could transfer crude oil from the yumen oilfield to the coastar aïeas. The completion of Lanzhou-urumqi rail line in the second Five-Year Plan period also served the same propose' conveying crude oil for the Karamai oirfield to the oil refinery centre at Lanzhou. Another example is the construction of the chengdu-Kunmin rail line. rn order to exploit the iron ore and coal resources in the western part of sichuan, the goveïnment spent more than cE 3.3 birlion and took L2 years to instalr the nearly 2,000 kms long "iïon and steel dïagon,, in the western mountain areas. Moreover by that time, a mod.ern transportation system in the southwestern part of the country T,\ras coming into existence. The railway system, at the end of 1990, coveïed arl the provÍnces and autonomous regions except xizang AR (see Figure 5-4). None the less' ât least 40 per cent of the network was concentrated in the 'i S '*'.¡
Chengdu
O Ndiondcspitâì R¡¡ls.ay \l - O P¡ovtncialCoptt¡.lClriG O OthcrûqjorFod om?:otñ
Figure 5-4. Railway Network in China. 1990 T7L Table 5-L2 The Development of the Transport tüet¡vork 1949_90 in China,
Rai]-wavs kms Year Total Airwavs (E) Ej-ghways !ûaterways Dr Pipel.ines L949 21,800 80 t7 68 73t6L5 L952 22 | 900 L26t675 L957 95,025 8t023 5, 100 26 t7 OO 254 | 624 L44 LoL ]-962 34, | 22 | L45 4r300 600 100 463 tsOO 161,900 30,900 1965 36 400 4r4O0 100 | 100 514,500 L57 t700 34 goo L97 0 41,000 | 4, 500 100 - 300 636t700 148,800 36 | 200 4t40O L97 5 46,000 700 783,600 400 135,600 47 tLoo 37 tLOO 5,300 198 0 49 | 940 1,700 888,250 108,508 110,500 198 5 52,L00 Bl,200 8,600 4, 500 942 | 4OO 109,100 L7L,20o 106,000 1990 53 ,37 g 6, LLt70o 900 Lr 02g t30O 109,200 340 | 400 L66,40o 15,900 Source: Chinars Statistics Bureau Note: E=Electrified Statistica]. Iegrþook of China, 1991. lines; D=DomesffiãGs; r=rnternatioEal Routes.
Northeast and lines in other parts of the country were stiJ-J- mainly north-south oriented. Ihe second target of this development is to improve the efficiency of the transportation network in order to convey moïe mineral products. Freight traf fic in china has gïor^rn from 315 million tonnes in 1952 to g,706 mi].lion tonnes in 1990, attaining an average growth rate of 9.4 peï cent per annum. comparÍng this Tate with that of the total tonne-kilometre ratio in the same period--a rate of increase at the level of 9.g per cent peï annum__ means that while the transport system has experienced remarkabre development since the 1950s, moïe expansion in fact has been achieved in highly-intensive freight transport as a direct result of the development of the long_distance routes, notably with respect to the railway system (see Figure 5-5). china now stands high in the worrd regarding highly-intensive freight transport. Expressed in tonne-km of freight per dollar of GNp/ china's ratio (billion tonne-kilomeües) OõõõtsAE8AA91 ãF H 1952 ûq 1.954 |1 o (tl ¡ 19s6 Ctl o 19s8 I I 1960 Þ I I ta I
I 1962 oq I H 1964 g r-f q ão 1966
t-it I 1968 hl I rln I t- 1.970 o I I oa I H 1972 ')hJ I { 1974 Ft! hl¡ (') 1976 I II \.1 ï 1978 I I 1 980 s 6 - 1982
1.984 o 1986
1988
1990 L73 (3 'L7 tkm/$GNP) is almost twice as intensive as the united states (L'87), rndia (L-67) and Brazir (r.40) (woïld Bank, r9B5). clearry, country size and resource location are decisive factors in the high intensity recorded by china. lnlhile the country is as large as the united states, the popuration is far more concentrated. over 70 per cent of the popuration rives east of a Beijing_Guangzhou rine, while in the united states both the east and west coasts are highly developed' Regarding mineral resouïces7 the most commonT such as coal and iron ore/ aïe spread throughout the country. Hohreveï, the conditions for exploitations of coal and iron ore in the North and the Northeast aïe more favourable than in the otrrer regions. concentrating on these ïesources will increase transport intensity more than would the development of local production closer to demand areas. The trade-offs aïe between higher mining costs and the lower transport costs of regionar mines on the one hand, and lower mining costs and higher transport costs of concentrated mining on the other. According to the I¡torrd Bank (1985), shanxi coal can be competitive in coastar china, d.espite transport distances geneïarry exceeding r,000 kms, because of its favourable conditions for coar exproitation, rower costs in capital construction, operation and maintenance/ as well as high quality of coal. considering that most rail rines out of the coar_producing areas of North china are operating at oï neaï capacity, the appropriate transport cost to use for the puïpose of comparison is the long-run marginal costs (LRMC are tota]. costs including capitar construction, operation, and. maintenance costs, carcurated by using L74 an appropriate factor to reflect the opportunity cost of capital based on construction of new lines). such eost varies from place to place depending on rocar condiÈions and topography. Tïanspoït over 1'000 kilometres' distance by doubre-track railway may be some cy 20 per tonne, but about cg 30 per tonne on a single_track railway line' coastar shipping oveï several thousand kilometres may be cy 20-30 per tonne, but road transport cost might be just as high for a distance of onry 200-300 kms (see Tabre 5-13). rf severar modal transfers lfor exampre, rail to ship to rair to road) are required to transport coalr sâYr from shanxi to an inland city in the south, totar transport costs courd be cg 40-60 per ton, justifying coal production in the south even under unfavourable conditions and at high costs (up to cg 80-100 per tonne--or 2 to 2.5 times the production costs at the moïe favourabre deposits in shanxi province) - By these rights, local production cost, for exampre,
Table 5-13 rndicative costs of coar Transport by Modes, 1986 Transport mode Route Distance (km¡ cost ( CY/t-) Rai]-wavs Datong-Beijing 300 6 -einhuangdao 658 I2 -Shenyang 1,000 20 -hluhan 1,500 30 -Guangzhou 2t4OO Taiyuan- 4B Shanghai 1,500 30 -gingdao 900 10 -Vùuhan I¡laterwavs Lt200 24 30,000 d¡¿t bulker Qinhuangd.ao - Shanghai 1f 350 10r000 dwt coaster Qingd.ao- Shanghai T4 3,000 750 10 tonne barge üIuhan-Nanjing 800 1,500 tonne barge Xuzhou-Nanjing L2 Roads 400 7 25 tonne track Datong-Beijing 300 7s Source: World Bank (l_985) V'Iashington, Wor1d L7s in Liaoning province approximately l-r000 kms away from the shanxi coal-fields, could still be competitive. unfortunately, this issue of comparative costs was not emphasized until recent years. At the provinciar level, railway freight intensity measured in kmlptskm and tkm/cx GDP is above the national aveïage in the North, Northeast, Northwest and the five southern provinces of Anhui, Henan, Hunan, Guangxi and Guizhou. All provinces, except for the three municipalities of Beijing, Tianjin and shanghai, aïe intricatery involved more or ress in either coal production oï nonferrous materiar suppry. Table 5-L4 shows the intensÍty of rail network along with the outputs of their coar and pig iron activities at the provinciar rever, and the provinces or AR with above average endowments both in railway and mining terms are Hebei' shanxi in the North; Liaoning, Jirin and Heilongjiang in the Northeast; HenanT Hunan and Guangxi in the south; Guizhou in the southwest; and shaanxi and Ningxia in the Northwest.
coal production and supply: neshing the national transportation network. A unique feature of mineral production and supply in china is the high share of coal in both commerciar and total energy consumption. rn 1990, coal accounted for moïe than three- quarters of primary commercial eneïgy consumption, the highest proportion it enjoys in any major country. From a chronic perspective, nearly Ts per cent of the tonnage carried by the modern transportation system revolves round coal, construction materiars, materials for the iron and steer industry and petroleum. L76 Table 5-L4 The Devel0pment of Minerar production and Rail.way Network, by provinces, 1990 Coal Piq Province iron _ .R+ilway intensitv 1million t) (million r) ( Km/pEslrm) * ( tkm/Cy) *'* Beijj-n 10.1 3.6 61.5 0.48 Tianjin 0.0 L.4 Hebei 3B .7 o.7B 62 .4 5.2 15. I 1.56 Shanxi 286.0 4.6 L4.9 Inner Mongolia 47.6 r.20 2.8 4.5 1. B1 Liaoning 51.0 11.5 24.3 ,fi]-in 26.L L.02 Heilongjiang 0.7 18.4 0.96 82.6 0.6 t_l.0 L.L4 Shanghai 0.0 5.3 ,Iiangsu 34.L 0.05 24.L 1.5 7.L 0.23 z}lejj.alrg L.4 0.6 Anhui 8.3 0.L7 32.L 2.9 11. 0 Fujian 9.3 0.72 iliangxi 0.6 8.4 0.22 20.3 0.9 9.5 0.49 Shandong 60.0 2.9 Henan ]-2.9 o.44 90.8 L.7 L2 .6 L.L7 Hubei 9.2 5.1 Hunan 9.0 0.5s 33.7 1.5 L0.7 0.82 Guangdong 8.9 0.8 3.8 Guangxi 9.8 0.L2 0.6 7.L o .62 Hainan 0.0 0.0 Sichuan 6.5 0.02 67 .9 4.5 5.1 0.33 Guizhou 36.9 0.6 Yunnan 8.1 0.70 22.3 L.2 4.3 0.24 Xizang 0.0 0.0 Shaanxi 0.0 0.00 33.3 0.4 9.0 0.89 Gansu 15.6 0.5 Oinghai 5.4 L.45 3.2 0.0 1.5 0.45 Ningxia L4 .4 0.1 8.3 Xingjiang 2L.O 1.05 0.4 0.8 o .43 The country 1080.0 62 .4 5.6 0.60 source: china's statistics Bureau, china's statistic 1991 " Note: km=kilometre; ptskm=per thousand square tkm=tonne kilometre. kirometres; L77 coal alone accounted for more than 40 per cent of the total tonnage (see Figure 5-6) - The prodigi-ous growth in demand since 1950 had the effect of creating a much-expanded market for coar in most parts of the country. coar frow, at the same time, acted as a contributor to, and a corollary of, rapid industrialization in general, and' the development of transport networks in particular. The symbiotic relationship between coar and transport is totally determined by the regionar pattern of coal consumption and production. Totar coar consumption of china T,ùas I, 055 nirlion tonnes in 1990 in comparison with a meïe 30 million tonnes in Lgi;g. Liaoning constituted the rargest singre coar market, taking about 83 million tonnes, some 7 -82 per cent of the total. rt lvas forlowed by Hebei' shanxi and shandong. overall, the coastar region Ì,ras estimated to consume 450 milrion tonnes of coal, about 42.5s peï cent of the totar, reaving the remainder to be shared among the provinces of the interior. The regional pattern of coal consumption is roughly consistent with that of population distribution' but quite at odds with that of industriar output. concoction of a simple ratio in which coar production is divided by coal consumption for a given region suffices to provide a measure of regional coal self-supply. rn 1gg0, there weïe rg provinces (including Autonomous Regions and Municipalities) which felI into the category of net coar-importer (arso see Figure 5-7). iriangsu was by for the largest, with a net import requirement that amounted to nearly 40 million tonnes, and it T¡ras f ollowed by Liaoning with more than 31 mÍrlion tonnes of net import coar. The r600 ffi 1400 oth.r,
1200 I Grain
E c".n.nt o 1000
800 lll guil¿.lilat.
600 E Nonmetal ore
QO N Metal ore
200 H Iron&steel
0 ffi Crude oit 1952 1957 t962 196s 1970 r975 r980 r985 1990 n coa (year)
Figure 5-6 composition of Railway Freight in china, by serected years L79 addition of shanghaí, Hubei, Zhejiang, Guangdong, Tianjin, Hebei, Beijirg, Jilin and shandong, each demanding Ímports of between r0 to 30 million tonnes, combined to account for 171 milrion tonnes, or two-thirds of the totar interregional coar import figure. Reorganization of this data so as to merge the 19 provinces into seven regions (Table 5-15) serves for two puïposes. First, it confirms the suggestion that inrand areas dispray higher coar serf_ supply ratios than their coastal counterparts and., secondry, it endorses the view that coal consumption in the coastar region as a whole has qrown more rapidry than in the aggregate interior since the rnid-lg7Os in line with the shift in regional policy from an "inward.-looking" orientation to an,,outward-rooking,, peïspective. Between 19Br and 1990, for example, coar consumption in the coastal region of shanghai-Jiangsu-Zhejiang gïeT^r by an impressive 296 per cent in comparison with only srightly under 6 per cent registered for the interior Gansu-Qinghai region. Resort to the ratio enables us to arrive at coar net-exporter regions as werr. onry ten provinces emerge in the category of net coal exporters, of which
Table 5-15 tüet CoaI- fmported for Severr Regfions years (nil-lion tonnes) r Selected
Region L9s7 L967 L975 1981 1985 1990 Shanghai -,Jiangs u - zhe j iang 6.56 13.93 Beij ing- Tianj in-ffebei Lg.7L 30.10 39.93 89. 06 liaoning-ililin 4.38 4.55 5.64 I_6.s8 26.36 48.27 L.O4 LO.20 6.09 23.38 Ifubei - Hunan - iliangxi 32.32 45. s6 4 .L3 11.25 L5 .7 6 23.64 32 Guangdong - Guangxi- Fu j ian L-.L7 .43 2 .40 5 .77 B .25 L2.22 31. 33 Gansu-einghai o .77 Sichuan-yunnan L.94 4.4L 4.2L 5.72 4 .45 1. 54 1_.61 Sources: Li Wen-yan (1990) Chinat Industrial Beij ing. Geoo¡aphv, Science press, China Statistics Bureau (L992) 0 180 shanxi is by far the most prominent. ïts net coar export in 1990 reached over 200 million tonnes, some 72 peï cent of the total. Henan is the second largest coal exporter and its net coar export reached nearry 30 mirlion tonnes. Another eight provinces, Heilongjianq, Guizhou, rnner Mongoria, shaanxi, Ningxia, sichuan, xinjiang and Yunnan achÍeved export ]-eve]-s of between 3 and 20 million tonnes ( ,). see Figure 5-7 There arises, therefore, an obvious need to transport coal products from producers to consumers even over fairJ-y long distances. Major coar routes are irlustrated in Figures 5_g and 5_9. Two general directions of coal flows can be easily elicited from these figures; namely, from north to east, and from north to south. The raiJ. l.ines can be characterized acco¡dingly. The main rail lines for coal transport from north to south aïe: ( 1 ) Beijing-xuzhou-Nanjing-shanghai-Hangzhou-Fuzhou ; (2)Beijing_ zhengzhou-vtuhan-Guangzhou ; ( 3 ) Datong-Taiyuan-iriaozou_ Zhizheng ; and (4) Harbin-shenyang-Darian. wÍthin this network, the two most important track sections are Zhengzhou-v{uhan and xuzhou-Nanjing: both carrying more than 25 mirlion tonnes of coal peï yeaï. The main railway lines for coal transport from the west to east are: (1) Baotou-Datong-Beijing_ginhuangdao; (2) Taiyuan_ shijiazhuang-Dezhou-eingdao; yanzhou-shijiusuo ( 3 ) ¡ (4) zhengzhou_ xuzhou-Lianyungang; ( 5 ) Beijing-Jinzhou-shenyang. without question, the most important of these is the Datong-einhuangdao line: its eminence is so great, indeed, that with the recent double-tracking and electrification completed, it can caïry 40-50 million tonnes of EffiTt&4 m.2
XINJIANG
,/ 4,7 3.2 \ ¿ I .\ ìíj\. t QINGHAI .tl 6,.';\J' \,. --i" 42 tu .t:Í )üZANG
CoaI æmuption r.-"i*'¿{i.,' (million totrncs) Effi- å,*l.i il:;., YüINAn- Fill-tiñ ,-í i curNcxr.,¿rJfÉK-^J^-oÉG \l C¡al prodüction (milion tounæ) l¡
0 360 720 kn rt
I 4{0th
Figure 5-7. Regional production coal and consumption in china, 1990 COAL FLOWS (Million tonnes) ---+ I _20 20_50 E) >50
QINGHAI . tì
(to Japarr ald S. Korea)
SICHUAN
JIANGXIi
/ Guangzhou I À .¡'bua DONG I
o ffikm
Figure 5-8. Major Coal Flows. Igg0 o Speialiæd øal-eraorl¡Dg porfs o Scni.s¡rccialized coal+xporting ¡mrfs Othcr rojor port
(Ð Capital c¡ty I Major rail linæ for ørt traNport
RaÍlway O C¡Uæ 0 360 720 kh
Figure 5-9. coal-Tr¿Ìnsport and Rail-port system in china, 1990 L84 coal per year in the first stage. Given the high densities of coal traffic in the north and the existence of bottlenecks, the northern rail network has been highlighted as the portion most in need of improvement. underlining this need is the emphasis which the centrar government has put on developing this region as the major supplier of coal to other regions. rn short, a large proportion of china's railway projects, either under construction or in the planning stage, are undertaken on the understanding that they should ease the movement of northern coal. Historicarry, coal movement in china relied on an integrated transport network, particularly the dovetai]-ing of rair and coastal shipments. But this tradition changed after the 1g50s when the development of the railway system T^ras stressed at the expense of coastal shipping. The latter was neglected on three grounds: the westward extension of mining activities, the uncertain political situation (such as The Korean vùar between 1951 and 1953) and the appearance of the regional self-reliance policy. As a result, the share of totar tonnagies handled by the waterway system in the long_ distance transport sector (that is, combining railway and waterr^ray) r¡ras reduced from oveï 31.3 peï cent in Lglg to 27.2 peï cent in L970. rn the beginning, this deveropment seemed to work werr, arthough the total scale of the national production was quite smarl and there T^7ere still some mineral ïesources accessibre neaï the consumer areas. From the mid-1g70s, however, circumstances began to spin out of control as industríal activities spread far and wide. 185 The railway system alone could not meet arl the requirements of coal movement. In fact, ten million tonnes of mined coal are lost annually through spontaneous combustion in coar-producing areas for lack of transport, whire perversely, industry in southern and coastal areas remain short of energy.
confronted with the main problems of increasing demand and worsening rail congestion, the goveïnment reverted at the end of the 1970s to a transport policy which aimed at buirding up an integrated transport system. one upshot: coasta]. shipping has grov',r faster than both inland shipping and rair, and the tonnage of the waterway mode in the long-distance transport sector raised its share to nearly 37 peï cent of the total in 1989. This change is particularly well-suited to serving the needs of the nine coastal provinces which, together with Beijirg, Tianjin and shanghai, accounted for over 53 percent of the total GNp and nearly 45 percent of the total coal consumption. rn rgg0, modeïn vessels carried over 700 million tonnes on domestic hraters, a l3-fold increase on L952. The freight volume of inrand and coastal shipping, 345-1billion tonne-km in 1990, r/ùas roughly one-third the size of the railway's freight volume. Moïe to the point, coal cargoes amounted to 52 per cent of all centrally_controlred (Ministry of communications¡ and 55 percent of arr localry_ controlled coastal shipping traffic. This growth of coal traffic has been greatest at the seven major ports of Dalian, eingdao, Shijiusuo, Lianyungang, Shanghai, Guangzhou, and especially einghuangdao. The major efforts to 186 modernize ports, began in Lg72, persist to this day, with particurar emphasis given now to coal terminals at einghuangdao, the largest coal port in china. Expansion of coal facilities has arso taken prace at smarler ports. coal exports aïe mainry funnelled through einghuangdao, shijiusuo, Lianyungang and eingd.ao, while coa]- destination favours Dalian, Shanghai and Guangzhou (see Figure 5-9).
5.5 Conc].usion There are many evidences to suggest that mineral ïesouïce is an important part of the regional advantages for economic arowbh, and upon it there are more opportunities afforded by mineral activity to create growth pores abre to foster regional deveropment. rn china, mineral activity has made its contribution to regional development in two fundamentar ways. First, by initiarly attracting outside investment capital (mainly through the government's budgets) into the region before increasing the regionar income and thereby allowing new injections to be used for local investment- secondly, by bringing land into increasingry intensive use through the utilization of otherwise dormant resources of the region as a result of the establishment of aïr integrated infrastructurar system, which is absolutely fundamental to economic development. on this account, mining was ïegarded from the outset as a step towards a broader mineral-based. industria]-ization.
t: t" very clear that arr the above analysis draws upon the LB7 inspiration of export-base theory, in which regionar growth is promoted by the ability of a region to produce goods oï services demanded. by the nationar economy, and to export them at a competitive advantage with respect to other regions. rn time it can be argued that the externar determinants of regional growth become ress important, that internal structurar change (an increase in the proportion of output and employment in manufacturing and services) and expansion of locar markets lead to se]-f-reinforcing regional growb'h' that internal factors become important in determining regionar growth rates, including externar economies, and that the internal organization of production becomes more important than the dominance of export production. The export-base theory, therefore, is a much simplified explanation of regionar growth and may be most usefully applied to its early stages, when mineral exploitation is often important. The extent of the murtiplier effect is related to certain internar features that characterize the economic and social structure of the region, and it needs to be eraborated further in terms of diversification of the mineral-based economies. This is the subject of the next chapter. 1BB Appendix 5-1 rndustrial Development in Manc_huria (tüorhteast china): The Largest ilapanese Col-onial. rrondiái' soon after defeating Russia and becoming the nelù master of southern Manchuria in 1905, the ,fapanese devoted their principal efforts to developing the new coloniar frontier as a supprier of minerals and metals to ,Tapanese manufacturing industries in the homeland' As a result, Manchuria witnessed a marked increase in mineral production, particularly coal, iron and steel and other metal minerars, and it became the largest heavy-industry centre in Eastern Asia. 1944 rn there r¡ras an estimated production of about 30 million tonnes of coar, three nilrion tonnes of pig iron and r.5 mÍIlion tonnes of steel ingots. coal had been mined in Manchuria by traditional methods for centuries- The big development came after LgoT when the south Manchuria Railway company (s.M.R., organized by the Japanese government in l-906 and charged with tapping the great resource potential of this region) took oveï the operation of the coal mines' Fushun was the most important coal producer in Manchuria and well known as possessing the largest open-cut mine in the world, owingr to its rich coal reseïves and favourable exproitation conditions. Production ïose from o.4g million tonnes in rg0 B to 7.2 million tonnes in 1930, accounting for three-quarters of the total Manchurian coal production. The other important coalfield is at Benxi. rt was producing about 0.4 mirlion tonnes annuaLLy, and was especially important as the best souïce of coking coal in Manchuria.
The discovery and exploitation of iron-ore ïesources for the 189 purpose of building up a Manchurian heavy industry and of supplying irapan's iron furnaces/ was given high priority by the irapanese pranners. Although the burk of Manchurian ore was low_grade, with an iron content of only 30-40 per cent and a high sirica content, and was confronted with difficurties in securing an adequate supply of coking coal, two iron and steel plants, Anshan and Benxi, received much attention, particularly after the t_920s. rn r933, the anshan rron hlorks r¡ras reorganized into a new plant and provided with new equipment. rn Lg44, this plant had a production capacity of some two million tonnes of pig iron and L.2 million tonnes of steel ingots. A similar expansion took place at the Benxi rïon Florks' and its pig-iron capacity was increased from 0.15 million tonnes to 0.65 mi].]-ion tonnes in L942. The Japanese also expended considerabre eneïgy and capital in the location and exploitation of other minerars, such as the production of aluminum in Fushun, and the production of molybdenum, vanadium, Iead, zj-nc and coppeï at Hulutao. rn 9eneral, the arapanese had very largeJ-y integrated Manchurian industry into that of ,Tapan. rn the main, Manchurian mineral and metallic products T¡reïe exported for manufacture or for finishing in ilapanese factories. vthile unskilled labour T¡ras drawn mainly from the chinese coolie popuration of Manchuria and north china, the managerial and technician groups T^rere exclusivery ,Japanese. Thus the collapse of irapan would in any case have largery disrupted Manchurian j-ndustrial economy since china at that time had neither the techni-car personnel to take their place nor the desire to 190 maintain a contractoï role for .Ïapanese home industry. 191 CEAPTER VI MINTNG _BASED DIVERSITICATTON
6.1 Tntroduction
Regional development is a long pïocess of accumulation and redistribution of national endou¡ments and social wealth. The forces that push the process forward come from the transformation of the economic structure- Mining activityr âs discussed in the rast chapter' can only play a dominant role at the early stage of regionar growth when the society changes from an agricultural base to one rooted in industry. For the successive stages, the push pohrer of the structural change should be handed over from mining to manufacturing, including mineral processing, and service industrÍes. such changes are inevitable, even for the mining industry itself. An expansion of mining industry is determined not only but by an increasing demand for minera]- consumption, but also by a successful transition to a growing independence of economic activity from a single ïesource base to a diversified manufacturing and service one.
Generally, mineral production is a sequential value-added process. once the industry is set up in a region, it always attracts some sequential businesses into its operation through the deveropment of forward and backward linkages. such an integration can greatly improve the local prosperity engendered in the national market. consequently, the internar structural change (steadÍry augmenting the proportion of employment in manufacturing and services) can lead to expansion of loca1 production and changes in L92 the export-import structure. The reasons for changes at the regionar ]-evel which have major inplications for economic development are often quite comprex. rn order to explain such changes thoroughry, the concepts of the economic base and the multiplier rÄreïe developed from the 1940s (Richardson' 1985) - Both of these have roots in economic theory; the economic-base concept is derived from the export-base model used to account for nationar development whereas the rnurtiplier is commonly associated with Keynesian economics. Resort to economic-base theory can help us gain an understanding of why some regions or countries have been growing or declining faster than others. For example, Berry and Dahmann ( Lg77,) examined the relationship between the growth of population and the composition of the economic base in the united. states. rn this study, they found that rower popuration growth rates ,nreïe experienced' by those regions with an economic base highry dependent upon primary economic activities such as agricultuïe, and high popuration growth rates r^rere rearized by those regions with an economic base highry dependent on goveïnment services and defence- procurement programmes. As rsard (L974) points out, a major limitation of the basic_ nonbasic concept (the coïe of the economic-base theory) is its emphasis on the aggregate effects of increases in regionar economic activity at the expense of detailed, structural considerations. Moreover' although conceptually the notion relates to income changes, its practicar application has largery been confined to 193 changes in employment. Another d.isadvantage of the basic-nonbasic concept is that, with its emphasis on the sale of exports as a return from money f10ws into a region, the concept does not recognize other vrays by which income may flow into a region or country; for example, through investment inflows and government spending- At the same time, money frows out of the region oï country in the form, for i-nstance, of wages paid to commuters, and, more importantly, the outflow of money connected with the purchase of imports of goods and. services. This last hints at the notorious "leakages" issue.
An alternative technique that incorporates the rear_worrd pattern of money frows is regionar input-output anarysis (rsard, r9741 ' The intellectual development of this technique occuïïed in the 1950s with the contributions of rsard (195r) in respect of the ideal interregionar moder and the moïe empiricarry_oriented applications of Leontief (1953). A major advantage of this technique is that it explicitly considers individual sectors in the regrional economy, or measuïes the impact of expansion in a major industry on a region or country. Addressing the fifth of the six targets earmarked for the consideration in the thesis, this chapter is designed to examÍne the regional impact of mining-based diversification, and that object is met by the use of input-output anarysis and regression analysis.
6-2 Mining rmpacts: the Evidence of rnput-output Multipliers L94 Some important concepts. Before discussing the output, income and employment multiplÍers in some detail, it is necessaïy to revieT'ü some important concepts relative to input-output models. First of arr, an input-output tabre represents the economy to be studied in terms of aggregated industrial or commodity groups oï sectors The table ' sets forth in great detair the transactions in Yuan (chinese dorlar) terms between the sectors for a given yeaï. rndustries sell goods and services to other industries and primary 'final demand' and buy their input from other industries and primary sources. The transactíons tabre summarizes the inter- sectoral flows in a given period and. is conventionally presented in matrix form' The transactions table provides not only a concise, descriptive snapshot of a particurar economy at a point in time, but it also presents a disaggregated and consistent accounting system for an economy. The finar demand components (mÍnus imports) are considered to indicate the equi-valent of GNp measuïes on the expenditure side, and primary inputs lminus imports) are the same on the receipts side- rn the regional policy context, the transactions tabre gives both a general understandÍng of the economy of a particular region and important information on particular aspects of the region's economy. onry wtren the transactions table has been compiredT can simpre mathematical procedures be applied to derive output, income and empl0yment multipliers for each sector in the economy. secondly, it is important to distinguish between ,open, and tclosed' input-output moders. rn opeïr input-output models, 195 household personal consumption is located as a column vector in the final demand portion of the table, and. the rohr vector comprisinq hrages, salaries and other household income is included in primary the inputs quadrant. Arternatively, the input-output table may be closed with respect to households by incorporation of the household roÏ^r and column into the endogenous matrix. This distinction is critical because the range and relevance of regional multipliers vaïy according to which branch of the input_output framework is favoured. Thirdry, there aïe two types of multipliers in input-output analysis, namely Type r and Type rr. They can be described as: Type r multiplier = direct and indirect effects effects / dj.rec,- Type rr murtiplier = direct, indirect and induced ef fects / dì-rect ef fects. rt is important to be ar^raïe at al]- times of the dif f erent properties pertaining to the types of multipriers which have been mentioned- For example, the income multipliers described in the sections above measuïe the direct and indirect effects , or direct, indirect and induced effects of a changTe in sales of one dolrar of the output of a sector in question to final demand. Type r and Type rr income murtipliers measuïe the income geneïated following a yuan (dollar) change in househord payments as a resurt of a change in final demand for the relevant sector. rn other words, the regional income murtipliers measuïe the income impact of a change in sales to final demand, whire the rype r and rr income murtipriers measure the income i-mpact of a change in income. similarly, the regi-onal 196 employment multipliers measure the employment impact of a change in sares to final demand, and the Type r and rï emproyment murtipliers measure the empl0yment impact of a change in empl0yment. A summaïy of input-output multipliers is presented in Table 6-1. For the sake of comprehensiveness, r have undertaken to calculate the fulI ïange of multiplier typesr âs the forthcoming discussion makes crear.
Table 6-1 Types of rnput-Output Mu1-tipJ-iers Output Simple gr=Ër¡ n+1 Total o, =Tt t ¡ rncome i=l Simple Household n: = Ë a n+r,i zij i=1 Total Household g: =it a n+r,i ii¡ i=I Type r tTt= n, ,/ a n+r, 1
v2 TYPe rr Hi = Il: / a n+L, j Emplolment n Simple Househo1d Ej =.Ð- w n+r, i aij r=1 Total Household =itw n+r,í Jj ", i=1 Y1 TYPe r uj'= / w \+L' j "' TYPe rr Ej = ri / w n+L, j symbols: n sectors ( i,_j ...1¡ z regiorrs ), _r ZiT = element of leontief _(r_,s...inverse-(open model¡, s = ( f_A ) r aij = household row coefficient of'sãctor i;-" vrij = employment row coefficient of sector í, zii = erement of reontief inverse (closed moder with househords endogenous ),
ãii = househord row coefficient of crosed moder (househords endogenous ¡ . L97 rnput-output murtipliers at the national and the provincial levels' An examination of the matrix of calculated input-output multipliers (see Table 6-2) provides important information with respect to the input and output ïesponses of each sector on a national basis. To prevent obfuscation, the essentials may be summarized in the manner stipulated below. 1' Generally, it would be expected that industrial sectors oï groups in china wourd dispray an overalr pattern in the size of input-output multipliers commensurate with their ranking in the overall economy. rn other words, the 'large' groups would be expected to be more diversified and therefore would be expected to contain stronger linkages which, in turn, would contrÍbute to higher input-output multiplieïs. when the I size, of a sector is measured in terms of the total output of all sectors there is a close correspond.ence between the ranking of the sectors and the size of the input-output murtiplieïs. For exampre, the agricurture sector is the 'Iargest' grroup, ranking first in the size of the output multipliers to boot (see Table 6_2) However' this supposition is not always truer païticularry when the multipliers aïe examined at the provinciar lever (Tables 6-3 and 6-4). The primary metal manufacturing industry, for j_nstance, looms large in terms of its contribution to the total output of arl sectors in Liaoning (10.59 per cent of the total output) but has a rather smarler stature on the output murtipriers (both Type r and Type rr; see Table 6-4). More importantly, it courd be found that, by and large, the size of the output multipliers of Liaoning 198 Table 6-2 Output, fncome and Emplolment MuJ-tipl-iers for Selected Industries: China, LggT output multiplier* rngome Sector rype r rype --E surtipliers @ r- r--Tüpe rr rype r Type rr 01-. Agriculture 5.28 L9.76 02. L.28 3.2L L.36 3.96 Coal mining 4.75 11.28 1.35 03. Crude oi]- a 3.39 2 .24 7 .63 natural- gas fnd. 6.02 B. 04 3.58 9.01 04. Metal ore mining 4.28 7.7s 6. 58 l_s . 02 05. Non-metal mining L .92 4.83 3.87 10.80 4.69 8.96 1. B4 4 06. Food Ind. 3.15 .62 3.24 B .97 07. 7.OL L2 .48 31.39 25 .92 66.6L Textiles fnd.- 3 .62 6. B9 5.96 08. V'Iearinq c L4.97 L4.22 32.96 leather Ind. 3.76 7.18 4.L2 09. Wood & wood l_0.35 10. B0 25.10 products fnd. 3.77 6.74 3.04 10. Paper & cu1tural 7 .42 7 .6L L8.82 articles Ind. 3.78 6.96 11. por^rer c heating 3 .82 9. 60 9. 15 22 .08 supply Ind. 4.23 6 .4L L2. Petroleum 3.L4 7. BB 3.26 L4.LL refining rnd. 4 .46 13. Coking rnd. 4 .57 6.L7 L5.52 15. B6 32.90 3.11 5.72 4 .34 10.90 L4. Chemical Ind. 3. 83 L3.43 38.30 15. Building 6 .47 5 .23 13.14 13.69 3L.92 materials fnd. 3.70 6. B0 16. Primary metal 2.Ll 5 .46 4.54 L2.37 Manu. Ind. 3.75 5.79 4 17. Metal products .47 LL .23 11. 01 26 . 07 Ind. 3.89 6 .40 2 .85 7.18 7 18. Machinery Ind.. 3.98 6. 53 .82 L9.07 I9. Transport equipment 2. B0 7.04 7.L7 L7.27 Manu. Ind. g.B7 6. 13 20. Electric machinery 3 .40 8.55 6.43 L4.46 Manu. fnd. 3.87 6. 09 3. 83 2L. Electronic equipment 9 .62 11. 19 25 .47 Manu. fnd. 4. 00 6.08 4.20 10.56 22. Instruments & L2.85 27 .69 meters Manu. Ind. 4.LB 7 .02 23. Machinery maintaining 2 .42 6.08 4.94 11.95 c repairing 4.05 7 .07 2.2L J.5t 24. Other Inds. 3.90 6.79 11.96 33 .29 25. Construction 3 .15 7.92 L2.7L 30.32 3.63 7.00 2 .02 s.07 26. Transport & 5.L4 14. 86 communication 5.40 10.39 27. Commerce L .37 3 .44 1.86 4.98 6.29 L7.42 L.23 3.10 28. Restaurants 3 .47 L.07 L.44 B .13 3 .52 B. B5 6.00 15.26 This table is calculated by the author. L99 Table 6-3 output' rncome and Empllynent Murtipriers for serected Industries: Shan*i prõviice I L9BT Oulp!¡t mu]-tipliers Incone multip1iers Sector Type Empf ovment mu]-tip]-iers r Type rr ffi Type r Type rr 01. Agriculture 4.96 10.66 1.36 2.26 02. CoaI mining 4.84 L.27 L.92 7.88 1.59 2 .64 65 03. Crude oi1 c 1. 4.74 naturaJ- gas fnd.. 4.09 8.94 L.2L 2.OL 0.00 04. Metal- ore mining 4.18 6.08 0.00 05. 2.L3 3.54 3.76 L2 .32 Non-metal mining a.aS 8.90 L.34 2.22 06. Food Ind. 3.32 5.22 2 .42 12.50 07. Texti]-es 9 .27 15.38 24 .35 39.31 Ind. 4.59 7.00 6.34 10. 51 08. Ialearing c 9.77 L7.39 leather fnd.. 4.36 5.92 4 .95 8.22 09. lrlood & wood. 6.26 11. 89 products fnd. 3.97 5.l_B 2 .87 10. Paper & cultural 4.77 3 .42 9. 55 articles fnd. 4.O3 6.07 3.32 1l-. Power o heating s .52 2.79 5. 63 supply Ind. 4 .07 4 .18 4.7 4 L2. Petroleum 7 .87 4.38 11. 06 refining Ind. 4 .07 7.58 13. Coking Ind. 3.60 L2 .90 4.33 L2.32 4 .65 3 .45 5.72 3.28 8.33 L4. Chemical rnd. 3.BB J.tt 15. Building 4.00 6.63 4 .28 9.24 materials Ind. 4.Lg 5 .07 r. 91 16. Primary metal 3.L7 2.7 4 8.92 Manu. fnd. 3.74 6 .57 17. Metal products 3.76 6.24 4.L6 11.85 rnd. 3.89 5.27 2.7L 18. Machinery 4 .49 2.86 7. B0 fnd. 3.93 5.69 2 .66 19. Transport equipment 4 .4L 2.55 6. 6B Manu. Ind. 3. 89 5 .67 3.L4 20. Electric machinery 5.20 2.35 5.51 Manu. Ind. :. eg 5.20 3 .45 2L. Electronic equipment 5 .67 3 .43 8.60 Manu. Ind. 4 .06 5. 65 3.18 s.27 3.L2 22. Instruments & 7 .47 meters Manu.fnd. 3.36 6.59 1. 89 23. Machinery maintaining 3 .13 L.77 4 .34 e repairing .OL 5 .97 2.LB 3 .62 14.80 24. Other fnds. 3.65 5.32 s4.LO 25. Construction 4.39 7 .28 B. B9 18.40 3.7s 5.70 2 .24 3.72 2.23 26. Transport & 6 .25 communication 4.92 6 .82 2.LL 3 .49 L .37 2.46 This table is calculated by the author. 200 Table 6-4 output' rncome and Emplolment Mu]-tipliers for selected rndustries: Liaoning province I L}BT Oulr¡ut mu]-tipliers Income Sector multipliers Emplovment multipliers Type r Type rr rypG r---TypeE Type r Type Ir 01. AgricuJ-ture 3 .97 37.77 1.36 8.36 L.34 7.96 02. Coal mining 3.76 27 .LL L.32 I .07 03. Crude oi]- ç natura1 1.33 9 .09 gas Ind. 5.94 13.01 2.70 16. 55 1.98 9 04. Metal ore mining 4.34 .82 L5 .37 1. B5 11.33 3.06 28. B3 05. Other mining 4 .6L 20. 5B L.45 06. 8.89 1.68 L4.32 Food Ind. 3.40 L7.6L 1_0 94 07. Textiles . 67 .L7 11. B4 7 L.77 Ind.. 3.78 12.58 4.52 27.76 3.36 L7.74 08. ïrlearing & Leather Ind. 3.95 12. B0 3 .28 20.15 2.87 L5 09. hlood & wood. .57 products fnd. 3 .61_ L2 .37 2.99 19.59 10. Paper & cultura1 2 .99 20.60 articles Ind. 3.75 L2 .07 3 .45 2L.LL 2.64 11. PorÀrer n heating L4.7L supply Ind. 3.88 13.33 7.35 45.L2 L2. Petro].eum 5.40 34 .82 refining fnd. 3.7L 6 .37 6.44 13. Coking 39.54 4.24 22 .43 rnd.. 3 .11 16. 05 TL.32 69 .49 l_0.04 67.95 L4. Chemical Ind. 3. B6 I1. 43 3.98 15. Building 24 .46 3.L4 L8.22 materials Ind. 3. BB 13.70 2.39 L6. Primary metal L4 .67 2.3L 15.56 Manu. fnd.. 3 .92 I1. 16 4.50 27.62 L7. Meta1 products 3.39 22 .33 Ind. 3.74 10. B1 3 .07 18.85 2.59 L5 .97 18. Machinery fnd. 3.93 L2.05 2.38 19. Transport equipment L4 .62 2.L6 L2.76 Manu. Ind. 3.77 10. 54 3.24 L9 .87 20. Electric machinery 2.BL L7.07 Manu. fnd. 3.75 9 .96 3.59 22.04 2L. Electronic equipment 2 .62 L4 .56 Manu. Ind. 3.97 10.36 3.36 20 .63 2 .67 L3 .28 22. fnstruments 6r meters Manu.Ind. 4.Os L2 .39 2.3L T4.L7 23. Machinery maintaining L.7 3 B .23 e repairing 4.LO L4 .94 L.82 11. 15 2.95 26 .59 24. Other Inds. 4 .4L L5 .92 1.80 25. Construction LL.02 4.73 54.38 3.7L 13.93 L.96 L2.06 1.90 L2.35 26. Transport & communication 5.47 L7.LL L.42 9.03 6.10 92.7L This table is ca].cu]-ated by the author. 20L are much larger than those of the country as a whore, whire the size of the output rnultipriers of shanxi lreplicated in Table 6-3) are appreciably smaller than those that apply for the whole country.
2 - For commodity gïoups falring within the mining industry, the output murtipliers of Type ï kind at the national level record values of 6.02 for the crude oir and naturar gas sector, 4.75 for coal mininq, 4'69 for non-metal mining and 4.2g for metal minerals. By comparison, the multipliers emerging for the ïange of activities comprising the whole manufacturing industriar group are generalry lower' varying from 3.rr for the coking industry to 4.1g for the instruments and meters manufacturing industry. only agriculture and the services' industries (r^rith the exception of the restaurant sector) can compete with the mining industries in the magnitudes obtaining for output multipriers. This situation is repeated in reference to the size of the Type ïr multiplieïs. The mining industry continues to occupy ,,top,, place in the sizes of the Type rr multipriers when the whole system is the centre of interest. rndeed the sizes of the Type rr multipliers--as one wourd expect__ are substantially rarger than those throvm up for the Type r situation (see Table 6-2). At the regional level the situation virtually duplicates that of the whore country. The high varues of the output murtipliers (Type r and Type rr) for armost arl mÍning industries in shanxi and Laioning stand out in comparison with those obtaining for manufacturing industries. 3 There is a singular ' occurïence, pracing mining at an 202 apparent disadvantage, which can be elicited from the analysj_s of income multiplieïs. For the mining industryT a ïangle of murtipliers can be found, from 1-35 for coal-mining to 3.58 for the crude oir and natural 9as industry at the national ]-evel and from L.34 for non-metal-mining 1in shanxi) to 2.70 for the crude oil and natural gas industry (in Liaoning) at the provincial level (Type r; see lables 6-3 and 6-41. rn other words, for each yuanrs (dolrar) worth of minerar ore production, a total of cg1.35-3.58 and cyr.34_2.70 in income is respectively injected into the whole country as well as into the shanxi and Liaoning economies. By hTay of contrast, the sizes of the murtipliers for arr other gïoups aïe higher, most noticeably in respect of the food industry which record.s values from L2'48 for Type r to 31.39 for Type rr: the latter hording title to the rargest murtiprier in the whole economy. simila rLy, the food industry is the largest gïoup in laying craim to the highest income multipriers of shanxi and Liaoning provinces. 4- A similar occuïïence is discernibre in the size of the emproyment multipliers. Among the 2g industrial sectors of chína, the food industry exceeds all the others in the size of emproyment multipliers ' The magnitude of employment multipriers referring to the mining industry as a gïoup, in contrast, is the rowest; and this particularry is the case for coal mining where murtipliers range from 2-24 for Type r to 7.63 for Type rr. At the provincial Ievel, the employment multipliers of the coal-industry scoïe even lower magnitudes than those applying to the whore country. ïïr Liaoning, for instance, the sizes ïange from r.4g foï Type r to 203 2.92 for Type rr; that is, they emeïge at a revel smarrer than alr the other sectors.
5' Not only can we find remarkable distinctions between the mining industry and other industries in the sizes of input-output murtipliersT but hre can arso discover them within the mining industrial group. rn china, the metal-mining industry has a set of small output multipliers but substantially higher values for both the income and emproyment murtiprieïs. conversery, arr the murtipliers engendered by the mineral-fuels industries appeaï sizeable' suggesting that they have a profound effect on national economic development. The crude oil and natural gas industry figures prominently in this respect. 6. Examining the overarl patterns of the input-output murtipliers at the provinciar levelr trüê find that the sizes of the output' income and employment multipliers for Type r in shanxi are always larger than their equivarents in Líaoning (see Tables 6_3 and 6-4r, while the sizes of all three kinds of murtipriers for Type rr are far lower than those applying in Liaoning. This situation courd be attributed to the lever of industrialization or economic structure- since the economic structure of Liaoning, one of the four largest industrial bases of china, is moïe advanced than that of shanxi, and the level of its industrialization is much higher than most parts of the country (see Table 6-5), it is not surprising that this distinguishing feature emeïges among the multiplier patteïns. 204 Table 6-5 patterns General of Economic Structure, Shanxi and f,iaoningt L9B7 (e.) Province AgricuJ-ture trlining Manufacturing Construction Services Total Shanxi L0.97 L2.04 42.3L L2 .44 22 .24 100.00 liaoning L0 .49 4.03 60.70 The country 20.04 8.09 L6.69 t_00.00 3 .68 56.96 10. 6l_ 8.71 100.00 Source:1. Chinars Statistics Bureau (1991) Chinese fnput-Output L9B7 . Account, 2. Shanxi's Statistics Bureau (1992) anxi t s L9B7 . 3. Liaoning's Statistics Bureau (1992) liaoninq' s Input-Outlrut Account, L9B7 -
6-3 Mining rmpactss the Development Linkages. of Forward and Backward
rndirect impacts occuï in those industries that suppry inputs to the industries directly stimulated and also em.brace the subsequent impacts of supprying these industries. There are broad relationships between mineral and other industries through which the activity of mineral industry can make its contrÍbution to regionar development. since considerable variation in such relationships occuïs depending on the geographicar scare of enquiry, it is preferable to emphasize the indirect impacts oveï the direct concept when focusing on the nexus linking mineral industry and regional development. The forlowing discussion sets out the basic elements of a framework provided by linkage analysis. Backward Linkages. A backward rinkage exists when an industry purchases intermediate inputs from suppliers. The mining industry, for example, buys machinery and equipment, business services, chemical prod'ucts and the like from other industries. such measuïes of backward linkage from the mineral industry to other industries in the chinese economy and selected regions can be constructed from 205 the L987 input-output tables, the most recent availabre. Backward linkage coefficients¡ âs measured by percentage of intermediate goods and services' inputs purchased from domestic industries, aïe relatively smaller for mining and mineral-manufacturing industries than they are for other crasses of activity. Among the r5 commodity groups examined in Table 6-6, the crude oil and natural gas industry and the non-metal-mining industry ranked lowest and fourth lowest, respectively. rncreasing the degree of integration of mineral industry into the economy of the country is a rengthy pïocess best accomprished by graduar exposure oveï time. This pïocess must begin with the implantation of scientific concepts at an earry stage and then
Tab e 6-6 rmpact coefficients for selected rndustries, LggT forg=ara fint Table 6-7 Mineral-based rndustrialization in the central Area of Liaoning province, LggT The Central g" Area of the province g. of the whole countïv Urban population 1 mil-1.ion ¡ 9.0 Area 49 .0 3.4 (000 km) 6. B fndustrial output 5.0 0.1 1biIlion yuanl 92 .8 Iron ore 60. 1 4.2 ( 000,000 tons ) 200.0 Crude oit 90 .1 25.0 ( 000,000 tons ) L34 .5 Coa]. 100.0 9.7 ( 000,000 tons ) 408.0 Pig iron 81.9 3.8 ( 000, 000 tons 98.1 Steel ) 86.3 16. I (000,000 tons) 1_10. 7 9L.7 18.0 Source: Li Wen-yan (1990) y'itiålåTi,iil,,ï,;,f,îîï#" (> ö SbcDyatrg Dalian '77 J9 't3.arco \-r t- \-7 \v ANhan -Fushu 7 t.91% 6.59qo FI\r (T \_v Beui Dandong 55.58Vo a->^ (\ rü Dandoug (I \7 JiDhou Yitrgkou /-->-sl.@r'o 15.53/o The æntr¡l ¡rc¡ ofl,iaonins I /-->, Iron otc al Oil tcminal (I - (4 I^ Coal Eining eDtre ¡ Oilfeld \7 Major indutria¡ citi6 Füin Liaoyang o q/ Major s€ port Petrochemic¿I @ works Pipeline 55.&Eo (Ð Iro[.slccl /-'>, coEplcx ffi Railway (A fI t? Large power stat¡on @ Oil rennery \ \7 Chaoyang Teili¡g- FÍgure 6'1 Minerar'Based rndustrialization in Liaoning 2L4 diffused areal production associated with exproitation of biological resources. rn fact, the regional distribution of the railway network in china is highly correrated with the expansion of mining activity. using Easteïn china as a benchmark (Figure 6_2), it is evident that the rail network is intimately invorved with linking mine to power station, mine to port, mine to smelter and so on r¡'Ihat is ' more, leading trunk lines orüe their existence to measures taken to effect these links. The reconstruction of Beijing-xugezhang (Tangshan) railway line in the r970s , for instance, secured an adequate iron- oïe supply for a rarge expansion of the shoudu rron and steel company. The 40-krn rength of railway line' conveying coal from Tangshan mines to the newly-buirt Douhe power station (northwest of Tangshan), T^ras brought to completion in r978. since the early 19g0s, most païts of the country have suffered from a great increase in eneïgy demand., parti-cularly in the coastal aïeas. rn ord.er to rerieve the eneïgy shortage, a large-scare railway construction has begun. The most important single project of this initiative is the Datong- Qinhuangdao line (960 km), connecting the largest coar producer in the country--Datong coalfierd in shanxi with the largest coal- export port--einhuangd.ao seaport in Hebei, and. it was compreted. in 1991' Another important railway is the yanzhou-shijiusuo tine (2gL km) linking the ' important Yanzhou coalfield with the second. specified coar-export port, shijiusuo seaport in shandong. ït was finished in 1990. \.n I i*gu" " DongshËng I ,,Pingshuo )ì iorI I ir¿1r :l rìi ctronpzlii O Minemounth power station @ Pel¡ochcmiql rvorks Pingdingshan Huaiuei I O Stcelworks @ Coalport Shiyan Bengbu O* '\f+-t-r I @ Oil tcrminal Naqi ffi \ @ fron orc terminal '\¿ I ..{ I Coal mining centrc Wuhan ^.'û? \.- t oirfierd \¡1--Y-''.Ìc^\ Canal Pipeline + Railway Figure 6'2 Energy Production and rransport in Eastern china 2L6 6-4 obstacres ro yiling a,rea nconversion': of Mining Activity Environmentar rmpacts There is anotheï peïspective concerning the contribution of the mineral industry, and that conceïns the grave imprications for the environment- For example, Harry caudill (Lg62) in his study of the cumberland mountains of Kentucky pointed. out that ,,coar has always cursed the land in which it lies. . . . ft is an extractive industry which takes asray al.l and restores nothing,,. Also from the experience of Appalachia in the united states and cases that have cropped up in many other parts of the world, mining companies are frequently regarded as environmental vandals. These negative images arways encouÏage conflict between economic and environmental interests, especially in developed countries. rf the minerar industries have invited a poor image in deveroped countries in regional devel0pment terms, the same can be said for china Ín the context of environmentar impacts and. resouïce management' rt follows, then, that discussion of the contribution of minerar industry to regionar development cannot be divorced from a consideration of the environmental problem incident to the industry' The following discussion examines the circumstances as they bear on China. Environment pollution in historicar perspective. FoT thousands of yeaïs pollutants in chinese rural societies consisted of onry human and animar manuïe and fuer ash. There is a rong history recording the utilization of manuïe and ashes from grass and wood as fertitizers which can be traced back to the ïemote yin and shang Dynasties (L766-L222 Bc) (Huang yuan-jun and zhao z,'ong_ 2L7 xing' L9B7)' This pïopeï and traditional use of wastes meant that the three elements in organic fertirizer, nitrogen, phosphorus and potassium' I^Iere continually recycled within the biorogical sphere and thus provided china/s farmlands with long-term soir fertilizer, to say nothing of protecting rivers and rakes from eutrophication. The ecosystem maintained its fundamentar sxatus quo of ecological equilibrium without the occuïïence of any apparent anthropogenic pollution phenomena. Following the graduar increase in popuration growth and the development of industrial production, environmentar pollution became evident, initiarly in the urban aïeas. These r^reïe 20th century phenomena and so, therefore, hras the attendant polrution. rn particular, the latter half of the century was afflicted with the problems that aïose following the birth of New china. prominent among them T^rere the population explosj_on; the ropsided deveropment of heavy industry, which racked a preformed concept of environmental protection; underdeveroped scientific ïesouïces and technology; and ten yeaïs' poriticar turmoir. As a consequence, environmental polrution became a maior probrem accompanying china/s urban development. Air porlution, f or example, Tiüas becoming palpably worse in many rarge industriar cities, such as shenyang and Fushun, not to say the national capitar city, Beijing (see Table 6-B and Figure 6-3 ) . rt r^ras not until LgTg that the importance of environmentar protection T^ras recognized and incorporated in the pïocess of economic development. rn LgTg the Fifth National People's congress adopted the Environmentar 2LB Table 6-8 Data on the Air eua1ity of Chinese 1970s Cities in the Late so2 Dustfal]. Dust concentration City (mglcm* ¡ (t-/km'I (mg/cm) Type of data neijing o .20 38 0.87 Average for the heating period Shanghai 0.08 44 in t97B o.28 Yearly average for L977 in different parts of tor¡m Shenyang 0.09 39 0.51 Chongqing o.2L Yearl.y averag'e for 1978 L4 0.46 DaiJ-y average for february and March in lanzhou 0.25 L97 I 36 L.32 Average for the heating Taiyuan period in l97B 0.24 35 0.20 Yearly Nanjing 0.09 63 average for L976 Xuzhou 0.15 0.11_ DaiJ.y average for 1976 47 L.26 A.verage for the heating period. between 1975 aná 197 B Fushun 0.05 4B 0 .96 Daily average for L974 China 0 .15 Standards 6-B 0 .15 long-term exposure (daily average) Note; *cm=cubic metïe. source' (åiå.ì" Flåf;ìåil" Protection LaT¡l of the People / s Republic of china f or trial implementation. Tr^ro yeaïs laterz an adjustment poticy r^ras announced and environmental protection hras made a mandatory part of development policy. Recent Situation. According to Reporx, environmental conditions in that yeaï herd steady. rmprovement, if improvement there T^ras, came in the hlake of a series of measures taken by the state; measuïes geared to the rapid economic development undeï T¡Iay that yeaï. Environmentar pollution and' ecologicar destruction were stirr rampant, but, in some aïeas7 polrution T^ras brought under control, and in some rurar aïeas, ecological conditions were seen to be actuarly improving. 2L9 Ïn 1-990 some 8 500 ' billion cubic metres of waste gas $reïe discharged in the country. of this figure, soot accounted for L3.24 million cubic metïes, a 5.3 per cent d.ecrease from the previous year; sulphur d.ioxide made up 14.g4 million cubic metres, down 4.5 per cent; and industrial dust comprised, 7.81 mirlion cubic metres, a 7.0 per cent decrease. National discharge of waste water was 35.37 billion tonnes in 1990' a level equal to that of 1989. of this totar, the discharge of industriar waste water stood. at 24.g7 birlion tonnes, a drop of 1' 1 percent from 1989. The water quality of the major rivers r^ras beyond reproach' save in sections f]-owing through towns and cities where pollution hras endemic. Ground water in most cities r^ras seriousry porluted, while 85.7 peï cent of indicators used in monitoring pïojects of urban rivers showed water quality below standard' Lakes hreïe contaminated by minerals such as nitrogen and phosphorus, suffering from a cycle of over-enrichment brought on by them. Much of the coastar aïea escaped pollution, but the same could not be said for some estuaries and bays, which experienced grave environmental damage. As to solid waste, discharge of solid industrial waste in 1990 amounted to nearry 578 nillion tonnes¡ ârr increase of one per cent over the previous yeaï. Accumulated discharge during the past few years r,üas 6.49 birrion tonnes, taking up 58,390 hectares of rand, a drop of 2t996 hectares from 19g9. Generally speaking, it is rapid industriar development which constitutes the major factor affecting the national environment and o Harbin Cì¡a!gchuB Shcnyang o ABha[ o o Baotou Talgsùan o BEUING oo TIANINo r Dalian YQingd¡o Zhengztrou Ãran-,.: SHANGTIAI I Guangzhou I 0 360 72Ð kn o 4,to km polluted Figure 6-3 Main Cities in China. 1990 22L it is this phenomenon which serves as the key link in establishing urban and rural ecological equilibrium. since Lg49, a comparativery complete category of industrial production systems has been developed in china. By the end of 1990 industriar output accounted. for about 45 peï cent of national product (GNp) . Horüeveïr âïr incompatibility between technical aspects and management, as well as outdated technicar processes and equÍpment, have caused. rosses in energy and ïesouïces and, as a consequence, have brought about a whole series of polJ-ution problems. The national aveïage rate of energy utilization is only 30 per cent' which is equivalent to the level of the developed countries in the 1960s- coal accounted for oveï 70 peï cent of the energy utilized and annual industrial consumption has reached more than 800 million tonnes. under these circumstances, that is to sây, huge coal consumption rates and low effective utilization rates, atmospheric potlution will mainly consist of smoke-dominated contamínation. According t,o statistical data, 60 peï cent of the nationwide emission of pol]-utants into the air h7eïe in the form of dustfarl' Among the pollutants detected weïe nearly 1500 million tonnes of sulphur dioxide, the agent which leads to acid precipitation' These weïe emitted oveï sizeabre aïeas in twenty provinces, municipalities and autonomous regions. The rate of recycling of índustrial water for reuse is veïy 10w compared with the consumptj-on rate and many industrial cities recycled less than 40 per cent. This figure is far berow the worrd rever. rn Lggol industriar riquid waste accounted for 70 per cent of the total 222 liquid waste, most of which T¡ras discharged directly into river systems without prior treatment. Thís is the main source of the surface-water pollution that occurred. neaï the outlets of trunk rivers close to large- and medium-sized cities (see Figure 6_3). rn the meantime, about B0 peï cent of china's total soh-d waste was produced by industry and amounted to nearry 570 mittion tonnes. solid waste is mainly in the form of ash and srag products from coal combustion and coal gangue. This accounts for 55 per cent of the total- other waste products incrude srag from smerters, chemical waste and industrial soot and dust. Environmental. impacts of mi¡s¡al industry. Many of the most obvious, and. some of the most seveïe, disruptions of the natural environment come from the development of minerar industry. Mining, quarryi-ng, dredging, exploitation and extraction from werls, aïe activitíes that have marked impacts on the landscape and natural environment' Directly linked to these activities aïe probrems concerned with the disposal of waste prod.ucts that aïe often produced by them. More importantly, once ïesouïces have been extracted from the earth and processed, further disruption of the environment may be caused. by their actuar use. The principal exampre is the burning of fossil fuels in power stations, homes, and engines' particurarly automobile engines, that resurts in emission of gasesr païticres, and in some cases, excess heat, into the environment. rn order to gain an insight into the manneï in which the development of china's minerar industry influences regionar 223 Table 6-9 Environmental fmpacts of Mineral- fndustry: China, 1990 Region R squared Air Poll-ution The Country Mineral processing fnd.. Hebei 0.004 0. 876 203.646 L4.28L Mineral processing Ind. 0.004 tiaoning 0. 913 240.302 t_5.502 Mineral processing Ind. 0.002 Shandong 0. 931 256.555 L6.OL7 Mineral processing fnd. úrlater Po].lution 0.002 0.862 2L4.39L L4.642 Ihe Country Mineral processing fnd. ,Jiangsu 0.156 0. 825 L36.472 LL.862 Mineral processing fnd. Hubei 0.108 0.907 244.856 15.648 Minera1 processing Ind. Sichuan 0.073 0. 956 625.368 25.007 Minera1 processing fnd. 0.052 rndustria]. So]-id I{astes o .826 L04.469 LO.22L fhe Country Mining fnd. 0.003 0.589 Mineral processing Ind. 40.038 6.328 Hebei 0.003 0,.7s0 87.043 9.330 Minera1 processing Ind. triaoning 0.003 O. BBl 170.056 13.041 Mineral processing Ind. Sichuan 0.001 0.833 95.069 9.750 Mining rnd. 0.014 0.852 L20.546 r0.979 environmental conditions' r have ïesoïted to the use of ïegression analysis. Application of this form of analysis entails, first, compiring a pÏoxy for the latter from the dependent vaïiables of T'rrater, air and solid wastes and/ secondry, ïeratiïrg these to the independent vaÏiabres of mining and minerar-processing industries. Data are amassed for 1990 referring to each of the three most porluted regions together hrith the country in aggregate. Beginning with the most overriding resurt, it is evident from Tabre 6_9 that a substantial direct rerationship exists at both the nationar and the regionar revers between minerar-processing industry and 224 environmental pollution. The mining industry, to the contrary, records a direct relationship only in one instance at the regional level (sichuan) and, again, at the nationar lever. since arr the provinces at issue record statistically significant equations linferred from tbt F varues) and parameters (manifest in the t values¡ and granted that the'explanation'(R squared x 100) attendíng the country and each provincial equation consistently exceeds 5g per cent, this rerationship must be treated with respect' Thus the regression analysis leads me to concrude that the serious environmental problems caused by the mineral industry at the nationar and provincial levels are mainly attributabre to the rapid deveropment of minerar-processing industries whereas, in marked contradistinction, the mining industry has a compaïatively much smal-J-er impact on its surroundings. 6.5 Conclusion rn the right of the weaknesses attending export_base oï economic-base theory, input-output analysis is introduced to provide us with insights into the overarl 1evel of regional economic activity based on mineral industry. rnput-output models have been deveroped which use the transaction accounts to capture the primary impact (di_rect prus indirect effects) and the totar impact (direct and indirect plus induced) of a change in finar demand for the minerar industry of china. Findings affirm that the latter mechanism prays a moïe important role than the former because the overarl impact of the 225 mineral industry extend.s far beyond mere direct effects. rt should be noted that such models necessaïily ignore a number of factors which may be critical to industrial performance, such as supply scarcity, foreign competition and technological change as wel-J- as price changes. Despite the rirnitations impinging on input-output anarysis, the fact remains that impact analysis based on input-output moders is a highly usefur exercise in one important respect; namery, it allows the apprication of a uniform methodology to a data base consistently derived across industries. Nickel ex a7 (1978) have observed that multipliers derived from other techniques aïe not generally as amenable to interindustry comparison as those rooted in input-output anarysis, and aïe thus somewhat rini-ted in their usefulness for policy puïposes. rt is clear that to a certain extent the anaryticar technique chosen depends on the type of study being conducted; for example, the interregional and regional input_ output moders can be used to assess the impact of specific mining projects as werr as the mining industry at rarge. The format of the models can be adjusted to refrect the variations in scare. rt is possible to generarize to some extent about the impact of the mineral industry on china's economies. The input_output multipriers of the minerar industry, for the most paït, are quite low for the mining industry and remarkabry high for the mineral_ processing ind'ustry in comparison with those of other industries. To be specific: (1) the totar income generated in the economy (cDp¡ resurting 226 from a milrion-yuan increase Ín demand for mineral products is weII within the range calculated for other industries; the multipliers for mining ïange from 3.39 to 9.0ri at the same time, the multipliers for mineral processing activity register from s.46 to L5.52 (see Table 6-2)¡ (2, one job in mining industry creates one to fourteen other jobs' while in mineral-processing industry an incremental job introduces thirteen to thirty-seven others in the national economyi (3) per million yuans of input, the amount of output created by mining is remarkably higher than other industries, but by minerar- processing activity it is neither remarkably high nor remarkably low; (4) the development of the linkage effects for the mineral industry, especially the set of forward rÍnkages, has become a determining factor in the size of i_ts input-output murtiplieïs. After examining the positive effects of minerar industry, r turned to discuss the negative impacts on the economies; that is, the bundle of environmental impacts. rndicators have shown that the situation of aír, water and land pollution in the major urban aïeas of china, especiarry in the urban aïeas deveroped mainry on mineral-based activities, became steadily r^roïse until the early years of the 1gB0s, although the chinese government had acknowledged the existence of these problems from the mid-1970s. Regression analysis intimates that the development of the mineral- processing activity has a veïy close relationship with environmental disruptions' particurarly in urban aïeas, w¡ite the 227 mining industry disseminates linited effects on its surroundings. rt has been recognized that the resouïce and environmentar problems in china are intercorrelated to a greater degree than in many other countries. First, the huge popuration intensifies the ef fects of land, mineral ïesouïce, r,trater, and climate constraints. second' economic development in china places heavy reliance on coal as its prime industrial and domestic fuel. Third, the backward.ness of china's industry and infrastructure makes it very difficult to design and imprement modeïn, technology-based strategies for pollution control and resource management. Hitherto, this study has examined china's mineral industry in terms of its performance in both nationar and regional development. rt is clear that the country possesses a rich and varied mineral resource base arong with the variables that tend to impact on production, utilization and location of ind.ustrial minerals: a large, growing popuration, rapidly increasing living standard.s, an expanding industrial base, growing needs for export earnings and technorogy introduction, a vast unmet demand for infrastructure, abundant low-cost rabour and an increasing conceïn for environmental protection. These variables, and the intricacies of their interaction, aïe best explored with the aid of a standard statistical methodology. To that end., the study wirr direct our attention in the next chapter to murtivariate techniques--factor analysis and cluster anarysis--in order to arrive at a measuïe of the independent contribution of mineral production to the national socio-economy in general, and its impacts on the national centre- 228 periphery structuïe in particular. 229 CEAPTER VII METEODOLOGY AND APPLICATION 7.I fntroduction A theme running through this thesis and one that has been emphasized in the last two chapters maintains that the development of large-scale mineral ïesouïces and mineral-based industrial projects in china in recent decades has been instrumental in moulding the country's regional development. such a deveropment has promoted structural transformation and, thereby, stimurated economic, social and demographic arowth in the affected aïeas. Howeverr âssêssments of mi-nerar production and its impacts on regional devel0pment aïe often quite complex not only because of the uneven distribution of mineral ïesouïces but arso because of spatiar aspects of mineral production being viewed broadry as the whole process of change brought about by the creation and expansion of an interdependent' national economic system. Regionar development is not simply economic arowth; it has broad causation linkages between economic and sociar activities. rndeed, in the context of minerar exproitation in china, whire economic arowth has been of primary conceïn' it does not mean that sociar consequences must be overlooked' Nor is development exclusively measured by economic criteria such as GDp per capita or industriar output; criteria of social welfare and infrastructure aïe increasingry important. Discussion of the contribution of mineral production to regional development, therefore, cannot be divorced from a consideration of social and other economic factors. 230 rt is equarry important to be mindfur of the fact that development is fundamentally about correcting inequality, and this is a spatiar as wert as sociar, demographic and occupational problem' A basic concept about it is cumulative growth. As already mentioned in chapter Tt once a region (for whatever ïeason) gains an initial advantage oveï others, various forces tend to widen rather than reduce the gap between them; once triggered, growth proceeds by /circurar and cumulative causation" while spatial interaction with other regions tends to heighten the regional disparities by the pïocess of 'backwash' (Myrdar , rg57 ) . Arthough eventually counteracting /spreadr effects can deverop, these tend to be weaker, and cannot prevent the development of a ,centïe_ periphery' structure. The peripheries of a nation deverop a dependent relationship to the industriar centre, supprying it with resources' inputs, and ragging behind it in deveropment. vthen economic arowth is sustained oveï long periods, some equilibrating tendency may occur and pïogïessive integration of the space economy may resurt, through outward fl0ws of growth impulses down the regional hierarchy and catarytic impacts on surrounding aïeas (Berry/ I973). rn view of arl these factors, anyone desirous of grasping a comprehensive appreciation of devel0pment should pay heed to two basic questions First, ' are there any independent contributions of mineral production to regionar deveropment once the overalr patterns of socio-economic change aïe taken into account and., if so, how great are they? second, and folrowing from the first, what 23L is the infruence of mineral development on the national centre- periphery structure? To ansT¡reï these questions adequatery, it is necessary to rely on statistica]- analysis. The main research objective of this chapter, therefore, is to arrive at an adequate means of modelling the intricacies of the stimuli afforded to regional devel0pment by mineral production. rn so doing, it fulfils the sixth and the rast target outlined in chapter r; a target which' like the others, is put forward to revear the extent by which development stems from mineral activities. 7 -2 The Modelling system and Data: Description progressing Exp1-anation to Like most other research contexts, the relationshÍp between mineral production and. regionar development can be examined by making use of a rarge number of variabres. yet since many of these variables are interrerated, information i_s duplicated and the essential structure of the system is obscured. rn order to eradicate the obscurity and discover underlying structure, it is essential that the statistical tools provide a means of deducting redundancies from a set of interrelated variab-les so that what remains is a 'simple structuret consisting of a small number of composite indicators lvariables). certainly, one would expect a priori that minerar production would influence seveïar development indicators acïoss the spectrum of socio-economic phenomena in a roughry even fashion. The set of indicators (variables) constitutes a multivariate system, one couched in this instance to represent the natu="" of regional development. The corresponding influences of 232 mining on the variables within the murtivariate system are uncovered initially by means of correlation analysis. combining bivariate correrations i-n a manneï which dispenses with redundancies calls for multivariate techniques, and in particurar, factor anarysis. euite simpry, this is a methods of investigating the correration structure of a multivariate system. rn essence/ it is designed to uncoveï causal oïder, exprain uniformities t or classify correration- The nature of the factorsr âs werr as the relationships between the factors, can allow one to summarize the basic characteristics and patterns of the research perspective. considering the general pattern of regional development in china, there areT at least, two common factors expected to occuï, one which courd be denoted as a social development factor reaving the other to be interpreted as the mineral-industry-led growth factor. rt is also important to rearize that, in the first prace, regional development in china is the consequence of a rong pïocess of accumulation, redistribution of natura]- endowments and sociar wealth, and., in the second, that minerar activities have prayed a dominant rore in regionar growth onry in the ]-ast four decades when the country has changed from an agïaïian society to one rooted in industry' rn this sense, therefoïe, the socia]- development factor courd be expected to be the reading dimension emerging from the mass of development strands leaving the minerar-led-growth factor to have a less significant role in china's regionar deveropment. once the conmon factors aïe identified, the next step in the study is to classify the set of observations into gïoups so that 233 the spatiar consequences of mineral development in china can be tested. r maintain that there shourd be two singre gïoups with large dissimilarities oï statistical distances separating thern if there is a centre-periphery structure embedded in china: one of these should collect together the observations constituting the portion "centre" of the country whereas the other should assemble those observations composing the "peripheïy,,. Should this not be the case' it cannot be claimed that minerar production has any significant and stable effects on the deveropment of a centre- periphery structuïe. This would conflict with the ,,regional,, aspect of the general hypothesis which holds that the centre_periphery structure, if anything, should be reinforced. as a consequence of substantial mineral developments. cruster analysis can be employed to test this hypothesis. Not only can cluster anarysis provide for the extraction of discrete groups by hierarchicar plot to show an overall pattern of the centre-peri-phery system but also it can test the general hypothesis without requiring any changes in the nature of the original input data used for factor analysis. Factor analysis and cluster analysis can be valuable tools in the exproration of multivariate data. By organizing such data into common factors and clusters, factoring and clustering can help us discover the characteristics of any structure oï pattern present. Both techniques aïe often compared to each other, and much has been written concerning the relevant advantages and disadvantages of each technique (Everitt I Lg74 and 1gB0). often, the methods aïe distinguished from each other by suggesting that factor anarysis is 234 mainly concerned with grouping the corumns of a matrix x (i.e. the variables) whire cruster ' anarysis is pïeoccupied with grouping the ror^rs of a matrix x ( i. e. the observations or individuals ) . A more fundamental difference, perhaps, is the explicit linear model assumed in factor analysis (McDonard, 1gg5). However, the puïpose of this chapter is not to consider the claims and counteï-claims made by the proponents of the two classes of techniques. Heïe, it should suffice to say that both factor anarysis and cruster anarysis should be considered for the exproration of comprex murtivariate data' Figure 7-1 outlines the different steps inherent to both techniques as applied in thj_s study. rn order to empiricarly apply the foregoing modelring system (see Figure 7-L), data on chinars economy of 1990 aïe corrected. The observed. regions in this study coveï 27 provinces and Autonomous Regions and the three municiparities of Beijing, shanghai and Tianiin. All the data for this study aïe compired from information contained in the staxisxics yearhook, 7990, the only reriabre official information in china. Tabre 7-1 rists these data when couched as variables. rn terms of the intention of this study, 25 variables aïe selected, each of which can be crassified as bearing on mineral industry t oÍ social, economic and environmental deveropment. The gÏoup representing mineral industry consists of seven variables (coAlour' orlour' prcrRoN, srEEL, MrNASs, RAüTMASS and MTORALL). The Teasons for choosing these variables to stand for mineral industry are self-evident. coal and crude oil are the two primaïy eneïgy similarities ¿¡ss¡niiaritiesor /> fl between / / \ \ correlationsbetween observation" variabtes // \\ Y P R (nxn) (pxp) factor analysis groups of observations groups-of variables--factors --clusters (testing (provins the spatiat any independent contributiori consequences of mineral of mineral production to regional development) growth) Figure 7'1 Modelling Framework of Factor Anarysis and cruster analysis 236 Table 7-1 Variable Explanation Variables Contents COALOUT output of coal products (mlt) (1990) OILOUT output of crude oiJ- (mltj PÏGTRON output of pj.g_iron (mlt) tfgg0) STEEL (1990) output of crude steel proàucts (mJ-t) (1990) CAPTNVE capital- investmelt per capita yuan/p) GDP lioSZ_oò GDP per capita (yuañ/p¡ I1SOO¡' TERTVAL tota1 value of tertiaiy inau"try per (Yuan/p) (1990) - capita ÏNDASS industrial fixed assets per capita (yuan/p) (1953_ lee0 ) MÏNASS fixed assets of mining industïy peï capital- (yuan/p) ( 1e90 ) RAWMASS fixed assets of raw material manufacturing (Yuan/p) (1990) per capita STUDENT number of university and col-J-ege students peï thousand persons 1çTt'.9) (1990) SCIENT number of scientists ãnd'technicians persons peï thousand (p/Lp ) ( 1990 ) HOSPBED number of hospital beds per thousand persons (p/Lpl ( 1ee0 ) INDEMP number engaged in industrial persons emproyment per thousand rc/ip ) ( 1990 ) INCOME per capita income (yuan/p) (1990) ÏNDVAL output value of industry-per capita AGRVAL output (yuan/p) (1990) value of agricultuie per capiùa lvuan/p) ( 1e90 ) URBANP ratio of urban population at. provincial lpercent) (1990) J-eveJ- ENECOS total- energy consumption per hIASVüAT capita (iuce/p) (1990) discharge of waste irater þer capita (cm/p) (1990) WASARI discharge of waste air pei capita (sm/p) MIORATL proportion of-mineral pioductã (1990) volume in i".iõút traffic of raitway systãm per capita G|p) (1990) FREIGHT freight traffic_volume pei capita (L/p) (I990) POPUL density of poputation (1990) FORETGN total- til=ml value of foreign'Lraae ier cápita (US$,/p) ( 198e ) Note: (l) mlt=million tonnes; t=tonne; p=person; mlp=¡1i11iort persorts; tce=tonnes of coal equivalent; cm=cubic sm=square metre. metre; (2) see Appendix 7_L. 237 sources/ and pig iron and steel aïe the two basic metar products for the national economy. The output of the four minerar products as well as fixed assets in mining and raw-material manufacturing can be regarded as powerful indicators of the development of the mineral industry. For its part, the last variable could indicate the dependence of local economy/ either minerar expoïter oï importer¡ ort the mineral prod.ucts. The sociar group is composed of five variables. These areT in no particular order: the ratio of urban population at the provinciar level (URBANP) ' the number of hospital beds per thousand persons (HOSPBED) ' the number of university students per thousand persons (sruDENT)' the number of scientists and technicians per thousand persons (scrENT)/ and the density of population (popul,). crearly' they evince the general pattern of regional advantages in urbanization, social wealth, education, scientific and technological development. consid.ering that china now implements a policy of nine-yeaïs of compulsory education and that enrolment in higrh school for all parts of the country has reached moïe than B0 per cent of the total eligible young people, the numbers of primary-school pupils and high-school students per thousand peïsons have, therefoÏe' little value as indicators of spatial variation in development patteïns. They are not used for that ïeason. The economic gïoup is the largest, containing GDp peï capita (GDP)' per capita income (rNCoME), outputs of agriculture (AGRVAL)/ industry (TNDVAL) and tertiary industry (TERTVAL), industrial fixed assets (rNDAss)' industriar emproyment (rNDEMp), totar energy 238 consumption (ENEcos) and foreign trade (FoRErcN). The first two variables can be regarded as a mirror to the general development of regional economy, while the outputs of agricultural, industry and tertiary activities can be emproyed for measuring the structurar change that has occurred in the rocar economy. The last four variables can be used to shed light on the deveropment of industrialization. The last sfroup' the environmental deveropment group, consists of si-x variabres. capital investment (cAprNVE) is a key factor coming to bear on the overall regional development environment, and it refrects the regional preference oï bias in the pïocess of national industrialization during the past forty years. The freight traffic vorume (FRETGHT) and total value of foreign trade (FoRErcN) represent the devel0pment of regional infrastructure, while the dischargre of waste water and waste air indicate the degree to which the regional physical environment is poJ-J-uted. 7'3 Apprication and Resurts: the Model's veracity The results of factor anarysis applied to the murtivariate structure are presented in Table 7_2 tll. As explained, the factor loadings indicate the net correlations between each factor and the observed variabres. The communality represents the proportion of the total unit variance of variable i which is explained by aIr common factors p taken together; standing, for exampre, at g 7.L026 per cent for per capita GDp. For the whole set of observed variabres, the percentage of conmon variance, explained by the four 239 fab]-e 7-2 Rotated Factor Loading pattern Variable Factor I Factor 2 Factor 3 Factor 4 Communality SCTENT 0.96862 0.13941 _0.0 3043 _0.03422 o.g5g75L CAPINVE 0.93640 _o 0.17610 .L5473 _o .02524 0.93 2434 URBANP 0.909L7 0.23280 -0.10854 0.15939 0.gL7g66 STUDEN 0 -89997 0 .23405 -0 .11657 EtilECOS -0. r-392s 0. 89 77 03 o.87932 0.26158 0.20138 0.23304 0.936491 TERTVAL 0 .87322 0.31870 _0.3 2507 0.03539 INDASS 0.86099 0.43373 _0.10069 0 .s7Lo26 EOSPBED 0.L7884 0.s7L552 0.85289 0 .26464 0.18669 0.03240 0.833333 FRETGET 0.84951 0 .26243 0.20448 GDP o. origo o.83266s 0.832s9 0.429ts _0.30455 0.0ris5 o.s7LO26 INCOME 0.794sO O _0.33825 .47L77 0.07318 o .s73564 R.AI{tltASS o.75469 0.6L446 0.o2LO4 0.0s349 0.s50425 TNDEMP 0.74349 0.51953 _0.20591 TNDVAL 0.2Lss8 0.sL3479 0.74288 0.51641 _0.35411 0.13899 0.s63264 WASARI 0.70913 0.6247L 0.03469 -0.1826s STEEL o.2B2L2 0-87687 0-2L763 0.s27688 PÏGIRON o.L62L4 -o.oaooa 0.900218 0.80913 0.45285 _0.01994 0.88 6454 WASWAT o -4922L o.72453 -0.30013 0.02340 FOREIGN 0.54569 _0.31070 0. 85 783g 0.66875 0 .LLL44 0. B5 3962 POPUL 0.40463 0.6448L _0.47702 0.09639 MIORATL 0.01006 -0.02601 0.7LL6L 0 .8L6347 COALOUT 0.04891 0.509556 -0 - 10612 0 -L4L77 0 o OTLOUT .66955 .34g2s 0.60L647 -0 - 03791 0.05888 0.12188 o MTNASS .822ar 0 .6s6288 o -52789 -o.21509 0.22035 0.61510 0.751830 AGRVAL -0.05736 -0 - 104ls o ****************************************.267 82 -0.6egés o .563287 Eigenva1.ue L3.24478 2-45303 L-64276 L.32749 18.668060 * * * * * * * * * * * * * * ir * * * * * * * * * * * * * * * * * * e" Variance * * * * * * * explained 49.08 2L.87 9 .77 6.05 86.77 240 factors, is 86.77 per cent. The technique for determining how many factors to extract in this study is Kaiser's crixerion suggested by Guttman and adopted by Kaiser. The rure is veïy simpre to apply. onry the factors having eigenvalues greater than one are considered as common factors. This method is particurarry suitable for principal components / designs and probably most reliable r¡rhen the number of variables is between 20 and 50 (cattell , Lgs2). rn terms of Kaiserrs crixerion only the four factors, in Tabre 7_2, have eiqenvalues greater than unity--the fourth factor, indeed, just exceeds unity (L.32749)--while the others have too small eigenvarues (]-ess than one) to be considered further- Table 7-2 also provides the basis to group the variables into conmon factors' Each variable is assigned to the factor in which it has the highest roading. once variables aïe assigned to conmon factors, the factors must be,,identified,,; that is, given a title descriptive of their contents. rt may be observed that there exists strong and positive correlation between Factor 1 and moïe than harf of the observed variabres, registering from a high of o.96g62 for scientists and technicians per thousand peïsons (scrENT) to a 10w of 0.54569 for per capita foreign trade (FORETGN). Factor 1 may be interpreted as the "social Development Factor,, characterized by a highly_deveroped urbanization: the resurts of highry-concentrated scientific, educational and public hearth services, capital and industrial investments (cAprNVE, rNDAss and. MTNASS); urban population 24L (URBANP); a high consumption of energy (ENECos); and a smalr population size as well as a low leveI of minerar production. The negative l0adings for coal and crude oil rnining (coAÏ,our and orlour) are in accordance with the centre-periphery relationship view that the mining frontiers have always pooï images in social development because of their remote 1ocations. Factor 2 may appropriately be called the ,,Mineral-processing- Led Growth and Regionar Environment Factoï,,, with highly positive loadings recorded for g steel production ( O. 7687 ) | pig_iron manufacturing ( 0 - s0913 ), water pollution (o .72453 ), international trade (0.66s75), population size (0.64481), air pollution (0 .6247L) and raw-materiar manufacturing (o.6L446). such a factor loadings, pattern strongry suggests regional growth based on mineral prod.uction, reaning particularly on the pïesence of the iron and steel industry. Development of this nature is instrumentar for occasioning a great increase in foreign trade and popuration on the one hand' and a serious damage of regional environments on the other hand' The negative loadings obtaining for the mining j-ndustry (MTNASS and MroRArL) refrect the fact that the deveropment of mineral-based industriarization is a powerful medium of spatial organization, working to reinforce the national centre-periphery structure rather than to create nehr rivals to the original core. Factor 3 may be regarded as the "coar-Mining_Led Growth Factor'¡. The two significant l0adings , o.7LL6L for coar movement (MroRArL) and 0.66955 for its production (coalour), indj-cate that coal movements render greater contributions to regional development 242 than does coal production. Through effecting great improvements in transport infrastructure, the former is critical to the formation of an integrated national transport system: in itserf far moïe effectual in furthering regional or interregional deveropment than mere coal production al0ne 1recall chapter v). The 10w and negative loadings apprying to arr other variables may point to the locational disadvantages of coal production when most coar mines remain in peripheral aïeas, which are always pooï in socio-economic foundations. Factor 4 may be rabelled as the "oi1-Exploj-tation-Led Growth Factorr" boasting as it does two significant loadings for crude oil production (orlour, o.B22sL) and mining investment (MTNASS, 0.61510). rt could be argued. that crude oir production is a capital-intensive business and that is demonstrably the case when it is recalled that more than 60 per cent of the total investment in mining activity in china during the past twenty years has been committed to this activity (also see chapter rrr). Factor 4 should, therefore, be considered as centring on one loading; that is, crude oir productíon. The low and negative roadings for arl other variables save the two highlighted irnply that the rocation of crude-oil exploitation and mining investment are forthcoming with sociar disadvantages comparable to those associated with coal mining. on the basis of the factor scoïes pertaining to the four factors, the 30 observed regions can be divided into four types: the highest qroup with factor roadings of more than 1.0; the higher 243 group T/'rith factor loadings of between 1.0 and 0; the rower gïoup evincing loadings of between 0 and -0.5; and finalry, the lowest group with loadings of less than -0.5 (see Appendix 7_21. Figures 7-2 to 7-5 show the classification of all observed regions for each factor. For Factor Lt shanghai, Beijing, Tianjin and Liaoning are identified as the reading regions enjoyi-ng privireges in social development. Liaoning, shanghai, Hubei and sichuan are the most important regions on the strength of minerar-based industrialization (Factor 2). shanxi, Liaoning and Heirongjiang are the three key regions in coal movements and production (Factor 3), whire Heilongjiang, shandong and. rianjin dominate the scoïes pattern of Factor 4 (also see Appendix 7-2). For the leading regionsr âfi "oveïlapped" pattern could irnply that, if a region wants to surpass others in enjoying greater pïogïess in economic development, it not only must register as high as possibre in a factor loading on a single critical factor but also register high loadings throughout the factor pattern. rt is obviousry the case that a hiqh factor loading is the most important for regionar development and it can be taken as indicative of the advantages of regional Tesource endowments. rt is also veïy important for a region to assume a leading position on several factors ostensibly unconnected with minerals; for it means more opportunities in economic arowth for this region than for other regions. Therefore, it comes as no surprise to notice that Liaoning emerges prominently in the overall factor pattern three times (on Factors L, 2 and 3) whire shanghai crops up twice (Factors I and 2), as does Tianjin ffi-t-- l o.o-r.o |s¡mllt o-____g-___?h Figure 7'2 socio-Economic Deveropment Factor of china Factor scores W'r.o ffi.ol-,"-ffil o.o-r.o tLS.Sl.ïl <-0s0 o.-----g---J¡ob Figure 7-3 Mineral-Processing Development and Environment Factor of China Fåctor scores ffiW ,r.o 1 ffi,,ffi o.o-r.o l , . l <-o.so I þ tu6 Figure 7-4 Coal-mining Development Factor of China Factor scores ffi 'r.o Fnf¿ -os_o.o F.-- l o.o-r.o g____f___30h Figure 7-5 Crude Oil-mining Development Factor of China 248 (Factors I and 4). of course, arl three regions are arready known as key industrial heartlands. rt is nor¡r necessaïy to focus on the classification of regional patterns of mineral production in china. For this puïpose ï sharl resort to cluster analysis, the technique that computes mathematical distances and dissimilarities among all observations l2l. The results aïe expressed in Figures 7_6, 7_7 and 7_8. A coefficient of less than 10 between crusters is chosen as the distance limit in terms of combÍning rescaled distance crusters t31 ' Based' on this limit, five kinds of regional combinations aïe formed. They are each detailed in turn. r- The nost advanced manufacturing centre category. This category has only one case, shanghai. after the opium waï, shanghai was opened up as a treaty-port city, and became the largest port of western economic penetration and the biggest harbour and industrial, commercial, and communications centre in the country before L949' since then, it has been listed as the centre of one of the key reconstruction reg'ions by the government, atthough alr mining products required by its industries must be moved in from other regiions and countries. Great progïess has been made since r979 not onry in aspects of economy, science, curture, transportation and communications but also in manufacturing industry, particurarly in raw-material manufacturing industry (as evidenced by the construction of the shanghai Baoshan rïon and Steel Complex, began in Lg7gl. So, Shanghai remains the largest urban centre in China. 249 Figrure 7-6 vertical rcicre plot using úrard's Method (Down) Number of clusters (Across) case Label and number X FE G Y S EiI glAG Z JO E G I.I S S SEE I UAUU TUTYENUEi i {NT I EEÑi;ñUUE LT S B z J r r N cNAANEanAñ{N rNñiãeaB I IEE À r N z N E AN N À u N ¡ r¡ ð ; B AAÀr NÀÀE G r, s e i ü üe r E o N N ir À uN G GN r c r e E ì x o u nN ; õ* G N N o N A x x z a ¡; ¡ r w r r Nirc r uNrrENuiñÀcMñrNNÀc ! õ x r r E N OGG.OGGI U BErirrNc +xxxxÐoüÐoooo()o(x)o0()ooülo(ÐoüxËoo()oofixxlo(xxjo(xxxþo(xxxtoü)oo(xxxþoü)o(xxxxxxxxxxxxxxxlo( TrÀN'JrN +)Õooüxxxxxxxxxx¡o Figr.rre 7 -7 Rescaled Distance CJ.uster Combined by Method using hlard's CAS E 0 Labe]. seq Anhui Henan Sichuan Yunnan Hunan Guangxi Jiangxi Guizhou Hainan Fujian Xizang fnner Mon. Ningxia ShanxÍ Ji]-in Hebei Hubei Shaanxi Shandong iliangsu zhejiang Guangdong Gansu xinjiang HeiJ-ongjian Qinghai Tianjin Liaoning Beijing Shanghai ZIIE IANG f cl*t€rl f]F cl*r¡¡4 cr*r¡r2 ffiffiffi El]]-.'.,1 cr*rars W....,r. clute¡3 l____4__jþb Figure 7-8 cluster Analysis of china's Mineral rndustry and Regional Development 252 Ïr' The newly-developed metropolitan centre. Like the first category, this gïoup is composed of just one case; arthough the case in point is now Beijing. Historically, Beijing has served for centuries as the political and cultural centre for the country. However, large-scale industrial constructions such as iron and steel, machine-building, petro-chemical and textiles industries have been initiated within its borders since the 1950s under the policy of 'transforming the city from goods consuming to goods manufacturing'. After the 1970s Beijing emeïged as one of the most important industrial centres of the country. The deveropment of Beijing oT¡res much to the privileges that it has reaped both from its politicar position as the capital of the country and its geographical rocation as the nearest neighbour of eneïgy-rich and ferrous-rich ïesouïces in shanxi and Hebei provinces. rrr' The highly-industriarized heartland. This group consists of Liaoning and Tianjin. They aïe the principal metarrurgicar and machine-buirding bases and the major oir producers in china. However, they fulfil different functions within this tendency. Greatly benefiting from its mineral ïesouïces, particurarly metal minerals such as iron ore, Liaoning seïves as the largest heavy_ ind'ustry base of the country and has done so for yeaïs. For its part' Tianjin has gained a high reputation in the deveropment of light industry and commercial services and. is also the largest port in North china. rts ocean-chemical and textiles industries are of national significance. fV. Fast-deveJ.oping aïeas. IhÍs category is the l-argest group. 253 composed of 15 provinces and Autonomous Regions/ this gïoup can be divided into four subsets. The first subset is constituted from rnner Mongolia' NingxÍa, shanxi and ,Ji1in. Economic growth in these regions is characterized by the rapid development of mineral industries such as oil, coal, iron and steel and nonferrous industry- shanxi' rnner Mongotia and Ningxia boast rich mineral Tesources while Jilin oT¡res much to its geographical location in between Heirongjiang, o*e of the major coar producers, and Liaoning' orle of the largest coal consumeïs in china. Emphas L¿'ng large-sca1e development of coal and outside coal movement, all of them have developed rapidly although their economic foundations were quite poor forty yeaïs ago. The second subset embraces Gangsu, xinjiang' Heilongjiang and einghai. The major driving por4rer of regional development for the four regions comes from mineral exploitation' particularly crude oiI. Befoïe Lg4g, armost no modern development was seen in these areas except for what occurred in a few large cities such as Harbin, the capital city of Heilongjiang, and Lanzhou, the capital city of Gangsu. Recent economic arowth has been very fast, however. Gangsu and xinjiang were the first crude oil centres of the ne'^r repubric. Heirongjiang plays host to the largest oilfield of the country while oir exploitation Ín the 1970s in Qinghai greatly stimulated local economic arowth. The third subset consists of Hebei, Hubei, shaanxi and shandong. Economic development in these regions during the past forty yeaïs reried not only on mining activity but also on minerar manufacturing. The large-scale expansion of the wuhan ïron and steer complex in Hubei 254 in the r950s and the 1970s, and the constructions of rarge petrochemical, cement and themopoT¡ïer pïojects in shandong and Hebei in the 1970s and the r9g0s, for example, provided great opportunities for these regions to become the important producers and suppriers of ïaw materials and electricity of the country. unlike the first three subsets, the last onez comprising Jiangsu¡ zhejiang and Guangdong, captures the coastal regions with well_ established educational, commercial, agricultural and industrial backgrounds, and they are important light industrial bases of the nation to boot. Nevertheless, minerar industry stirr plays aïr important role in their local economies, such as the rapid d'evelopment of oil refining in Guangdong and petrochemicat industries in Jiangsu based on importing crude oir from other regions since the 1970s. Benefiting from the /open Dooï, policy, industrial deveropment in these aïeas has progressed rapidly in recent years, especially in the light aspects of manufacturing. The v' developing areas- This group comprises Anhui, Henan, sichuan' Yunnan' Guizhou, Hunan, Jiangxi, Guangxi, Hainan, Fujian and xizang. These provinces and Autonomous Regions (A.R. ) can also be separated into two subsets. Belonging to the first subset, Anhui' Herran, sichuan, yunnan, Guizhou/ Hunanz Guangxi and Jiangxi are located in south and southwest interior parts of the country. They have pooÏ socio-economic foundations, constituting the traditional agricultural regions. HoT^reveï, fair-sized modern mineral industries have been established in them since the First plan Five-year period, such as coal and aluminum industries in 255 Henan' Guangxi and Guizhou; iron and steel industry in sichuan; and copper industry in ,Tiangxi. Because these aïeas are large in size, low in population density, and rich in mineral resouïces, they have a certain competitive edge where future development is concerned. The fact remains, though, that as a resurt of historicar, physical and political constraints, agricultural activities and husbandry are the mainstays of their local economies, and industrial development is still in a beginning stage. Although Fujian and Hainan are coastal regions, the longstanding political tensions associated with the Taiwan Question have constricted their d'evelopment prospects. Moreover, their sparse endowment of mineral resources has acted as a disincentive to both capital investment and the attracting of technical personnel. consequentry, they remain marked by a pooï socio-economic setting compared with other coastal regions. By dint of a comparison of the maps emanating from the factor analysis (Figures 7-2 to 7-s) and the cluster analysis (Figure 7_ I ), a few key findings can be elicited.. First, the division line of Type r of Factor 1 (with factor roadings of moïe than 1.0) is exactry the line which separates category r, TT and rïr from other categories derineated in the cluster anarysis. This spatial coincidence implies that the socio-Economic Factor remains highly relevant to the regional pattern of chinats modern development. secondly, all other divisions associated with Factor l-to-Factor 4 breaks are subsumed into two categories in the cluster anarysis. Further' this indicates that the other three factors, namely the 256 t Mineral-Based rndustrial Development Regional Enviïonment, Fact or r, the'coal-Ivtining-led Growth Factor' and the /oil-Exploitation-Led Growth Factor', have played a veïy important role in consolidating the centre-periphery structure rather than the reveïse. They have done this through reinforcing the leading positions of the centre areas ' TT¡ro good' examples of this tendency are the developments of heavy-industrial manufacturing in Liaoning in the fj-rst instance and nonferrous-metal manufacturing in shanghai in the second. Thirdly' for most developing areas, the spatial distributions of social development attaching to the factor analysis and the cluster analysis together pïove that mineral industry can only be developed on its mineral bases. rn other words, mineral industïy can act as an instrument for stimulating and sustaining regional development onry if the regions or^ln a good ïesouïce perspective. rt testifies to the fact that the richer the mineral endourment of a developing region, the greater are the opportunities that it can gïasp for engaging in mineral-based industriarization. coar production in shanxi and oil exploitation in Heilongjiang aïe the two crassic instances of mÍneral ïesouïces spawning industrialization. The other side of the coin, of couïse, is the lot of many deveroping areas' one in which a patchy mineral endov¡ment is not conductive to anything other than very limited ind.ustrial initiatives. Their overall form with respect to social development in consequence is uninspiring. 257 7.4 Conclusion It is certainly a basic characteristic of the relationship between mineral production and regional development that isomorphism, or the existence of simple, one-to-one causal relatíonships, is rare, and extensive study of a complicated multi- faceted relationship is required for disentangling the effects of mineral developments on the aggregate regional growth pattern. By default, then, we are forced into an investigation of a series of causally-related variables for examining the configuration of this relationship. Such an examination may be made moïe rigorous and less time-consuming if our explanatory variables and observations can be considered simultaneously, rather than in a stepwise, ,,one- after-another" manner. rn order to accomplish this aim, the analysis uses two different techníques: factor analysis and cluster analysis. The first is a branch of multivariate analysis designed to explain the correlations or covariances among a set of variables in terms of a limited. number of key unobservable, ]-atent variables. The second is the mod'ern statistical method of partitioning an observed sample population into relativery homogeneous crasses, to produce an operational classification. The objective is to sort observations into groups called clusters so that the degree of statistical association is high among members of the same gïoup and low between members of d.if ferent groups. The results of applying the two techniques in this study can be generalized in the manner presented below. 258 The socio-uconomic Development Factor dominates the regional pattern of China's industrialization. This factor pattern implies that the present formation of regional disparities in socio-economic d.everopment in China is a part of its historical process, which can be traced back to earry agles. The coastal zone is still the most favoured assemblage of regions in china's modeïn economy while the interior zone continues to Iag behind it. The lag persists d.espite much attention directed to eradicating regionar dÍsparities over the period extending from L949. Moreover, the three later factors--the Mineral-processing- Led Growth Factor, the coal-Mining-Led Gïor^r-th Factor and the oi1-Exploitation-Led Growth Factor--change nothing regarding the original centre-periphery structure. on the contrary, they reinforce the structure through improving the leading position of core regions as a result of developments in raw-material manufacturings. It Ís, therefore, the case that the traditional economic division of china into a coastal belt and an interior land bert remains very much alive and retains its rerevance for assessing regional development. rn fact, Lf 20 is selected as the distance ]-imit in the cluster analysis rather than the preferred 10, the number of clusters would be reduced from five to two. The upshot, once mapped, affirms the centre-periphery structure of chinats regional development. 259 The centrar area, consisting of shanghai, Beijing, Liaoning and Tianjin, concentrates on the development of manufacturing and minerar processing, while the peripheral area consisting of all the rest, relies on primary acti-vities or less elaborate industrial sectors (Figure 7_ e). iii The spatial distributions of social development attaching to both the factor anarysis and the cruster analysis indicate that for most deveroping aïeas rich minerar ïesources are the determinant factor not only to economic growth but also to social pïogïess in deveroping areas in the mineral-based industrialization. rn this sense, mineral industry can act as a key instrument to stimurate and sustain regionar deveropment in these aïeas onry in terms of their resource perspective: prentifur resources equars good growth prospects; scanty ïesouïces equates with much poorer prospects. iv. Another great contribution of mineral activity to regionar development is afforded by transport infrastructure; a contribution strongly supported by the roading pattern of I'coal the Mining-r,ed Growth Factor" lFactor 3). This finding indicates that through effecting great improvement in transport infrastructure, the development of mineral industry is critical to the formation of an integrated national transport network: in itself far more effectual in promoting regional and interregional devel0pment than W rhecehtrc^* lI..-TifSm] rhepeilphery Arcs 0_____lg___-3b Figure 7'9 peripher_y Proposed c9nt1g- structure of chÍna,s *Development RegÍonal by Ctusrer An"i'y.i;;t;h;birtã"ää zo "r 26L mineral production alone. v. Finally, exami-nation of the factor loading pattern (Tabre 7-2) reveals that there are onry four variabres, namery energy consumption (ENEcos), fixed assets of raw material manufacturing (RAWMASS), freight traffic volume (FRETGHT) and number of hospital beds (HospBED), which have positive roadings acïoss all factors. These variables, few though they are, provide an insight into the characteristics of early industrialization in china. Firstly, the structurar transformation from an agrarian society to one rooted in industry in a country can cause a great increase in mineral consumption (ïepïesented by ENECOS). secondly, under this pïessuïe, the system of production becomes heavily engaged in the devel0pment of mineral processing lindícated by RAIaTMASS). Thirdry, mineral development can further regionar deveropment through the inception of a nationar integrated transport system (demonstrated by FRETGHT). rinarly, arr the deveropments can provide the region with great opportunities for achievement of social welr-being conductive with the ,,take_ off, point (represented by HOSpBED). 262 NOTE tll ' using the factor technique, one could expect to define the minimum dimensionality ( tr¡ro key f actoïs ) of the data and a basis of the space (core veïsus periphery) in advance, like this study does, but the original factors matrix often turn out to be confusing. This means that grouping is virtua1ly impossible either because of high loadings for most of the variables or high roadings on a number of factors - such a restriction naturally leads to a unique solution: rotation- There are several rotation techniques to choose from, and in this study, the varimax sorution, one of the procedures of orthogonal rotation, is emproyed. The reason is simple' The varimax solution seeks a solution where the variance is maximized acïoss all factors in the matrix. The simple structure that results succeed.s in elÍminating factor complexity to a greater extent than other rotations. 121 ' The ward/s clustering method is based on statistical minimization of clustering "expansion,,. At any stage of an analysis the loss of information which resurts from the groupÍng of individuars into crusters can be measured. by the totar sum of squared deviations of every point from the mean of the cluster to which it berongs. At each step in the anarysis, union of every possible pair of clusters is considered and the two clusters whose fusion results in the minimum increase in the eïïoï sum of square are combined. The distance between two clusters, therefoïe, has a real "g'eometTical" distanee: a puïe statistically_evaluated 263 parameter which can be easily seen from the linking values on the dendrogram. ward's method is widely accepted as the best clustering technique of arl grouping procedures. For this ïeason, I have elected to apply it to my data. l3l. The algorithm deveroped by vtard also emproys a hierarchical grouping procedure. The grouping pïocess begins by considering K groups of subjectsz one subject per group. The K initial groups are systematically reduced from K to K - r to K - 2 to...to r group in the course of this hierarchicar grouping procedure. At each stage of the procedure the varue of the objective function is assessed. changes in this value from stage to stage provide an important crue for determining the number of "natural" groupings for the K subjects, and the number of gïoups can be calculated simultaneously by the computer when one uses the clustering computer pïogïanme. rn my study, five groups (at the distance 10) aïe judged to be the most revealing in terms of empirical substantiation lrecal1 Figure 7_7). 264 Appendix 7-1 Basic Socio-Economis fndices of China Region No. COALoUT STEELOUT CAPTNVE GDP TERTVAL 1mIr) (m]-r) (y/p) (y/p') (y/p) Beijing 1 10.05 Tianjin 4 .44 87 46 46IL L94L 2 0.00 L.67 s7 29 Hebei 3 62.43 3397 1610 Shanxi 3 .84 L632 13 31 399 4 285.97 2.39 2489 ïnner Mon. s 47.62 L37 4 48r Liaoning 2.73 188B 1325 498 6 51.01 L2.L6 3337 Ji]-in 7 26.10 2432 891 0.75 L997 158 6 551 Heilongjiang 8 82.64 0.95 Shanghai 27 80 L7 92 726 9 0.00 9.15 817 0 Jiangsu 10 24.08 557 0 2254 Zhejiang 1.90 L7 64 1-942 644 11 L.37 0. B6 L77 4 2008 anhui L2 32.O5 7tL 2 .48 103 5 1069 304 rujian 13 9 .25 o .52 L465 L534 503 Jiangxi L4 20.27 L.L2 1003 Shangdong ls 59.95 1485 467 2.27 L493 1569 474 Henan 16 90. B0 L .69 1065 103 6 Itubei L7 9.24 6.29 345 Hunan 1656 L457 373 18 33.7r 1.36 994 Guangdong L9 8.90 L.I7 LL46 356 Guangxi 2347 23L9 885 20 9.80 0 .52 848 Hainan 2L 0.01 922 273 0 .00 2347 1433 595 Sichuan 22 67 .85 4.95 1153 10 61 339 Guizhou 23 36.95 0 .47 Yunnan 1014 779 224 24 22.27 0.80 L239 Xizang 25 0.01 1061 262 0 .00 262L 1101 593 Shaanxi 26 33.26 o .49 Gansu 1858 113 0 382 27 L5.64 o .67 193 Qinghai 28 3.20 3 1039 s2L Ningxia 0.32 46L6 1480 605 29 L4.43 0.03 27 54 Xinjiang 30 2L.00 13 00 528 0.37 320l- L647 560 265 Appendix 7-1 Basic Socio-Economìc fndices of China ( continued) Region NO. TNDASS MÏNASS RAüIMASS STUDENT SCTENT (y/p) (y/p) (y/p) (p/tp) (p/Epl Beijing I 4036 Tianjin 333 807 L2.9 49 .4 2 37 32 t_825 484 5.8 30 .7 Hebei 3 1119 313 Shanxi 186 L.2 7.6 4 1B 60 704 248 1.8 LL.2 fnner Mongolia 5 L364 Liaoning 266 262 1.5 LL.2 ,filin 6 310 3 5L7 894 3.1 18 .1 Ileilongjiang 7 1BB9 257 2L5 2.9 13 .9 B 2409 800 340 2.3 15 .1 Shanghai 9 5890 ,Jiangsu I 105 6 9.1 33 .8 10 r467 B1 168 2.2 9.2 Zhejiang 11 113 9 Anhui 2L L45 r.4 7.5 rujian L2 686 111 L4T 1.1 5.8 13 805 27 93 1.8 7.5 Jiangxi L4 703 58 Shangdong LO7 1.5 7.3 15 13 52 347 198 L.2 7.3 Henarr 16 757 209 Hubei 80 0.9 5.6 L7 L2L4 55 268 2.4 10.3 Hunan 1B 743 56 118 Guangdong L.4 7.3 L9 L266 34 193 1.5 7.0 Guangxi 20 536 Hainan 26 BO 0.9 6.8 2L L266 5 1B L.2 6.8 Sichuan 22 786 105 Guizhou L2L 1.3 7.5 23 609 76 82 0.8 6.7 Yunnan 24 706 Xizang 46 86 I.2 7.3 25 300 16 53 0.9 6.4 Shaanxi 26 L062 LL2 111 Gansu 2.9 LL.4 27 L297 2L2 2L9 1.5 9.0 Qinghai 2B 2084 Ningxia 311 206 L.4 L4.2 29 L607 4L5 r43 L.7 L2.8 Xinjiang 30 153 0 668 204 2.0 15. B 266 .Appendix 7-1 Basic Socio-Economìc Indices of China (continued) Region No. TIOSPBED INDEMP INCOME TNDVAL ARRVå,L URBANP (b/íp) (p/tup) (y/p) (y/pl (y/pl ( e") Beijing 1 5.5 L9.7 337 9 67 59 646 58.4 Tianjin 2 4.L 22 .5 27 6L 7700 622 54.L Hebei 3 2.4 8.7 LLz6 Shanxi 18 63 593 13.3 4 3.6 10.8 1_090 1911 443 18.6 fnner Mongolia 5 2.8 7.6 Liaoning L079 L229 743 30.4 6 5.0 L6.2 L97 6 40L9 685 AL.s Jilin 7 3.7 LL.2 L357 2L96 752 37.9 Heilongjiang I 3.4 L2.4 L623 Shanghai 2483 7 06 AL.O 9 5.2 29.9 46L6 L2087 505 64.5 Jiangsu IO 2.4 L4.3 Zhejiang LB46 4 05s 852 19.6 11 2.3 L4.7 L7 43 3508 825 15.1 Anhui L2 1.9 5.9 Fujian 915 1191 659 L3.4 13 2.2 6.8 I_280 L7 36 747 17.0 Jiangxi L4 2.4 7.L 929 LLL2 667 L7 .9 Shangdong 15 2.L 8.3 L347 2639 Henan 776 L2.B L6 2.L 5.7 872 L204 583 L2.6 Hubei L7 3.0 7.7 L205 1841 Hunan 734 L9.6 1B 2.4 5.8 965 LL7 6 656 L3.7 Guangd.ong 19 2.0 9.3 L7 Guangxi 84 3009 950 2L.7 20 1.8 3.6 789 831 593 13.5 Hainan 2L 3.3 3.1 r161 690 618 L7 .L Sichuan 22 2.3 s.7 892 1150 Gui-zhou 599 13.9 23 1.8 4.L 642 666 445 L2.7 Yunnan 24 2.3 3.7 943 Xizang 939 576 L2.0 25 2.3 1.1 845 138 774 18.0 Shaanxi 26 2.6 7.0 9L4 13 63 Gansu s24 L7 .L 27 2.2 s.7 9L9 L2LL 450 L5.7 Qinghai 2B 3.6 6.3 Ningxia 1102 L247 553 28.0 29 2.3 6.6 1007 13 B9 530 26.6 Xinjiang 30 4.4 5.4 L340 L43L 94L 29.0 267 Appendix 7 -L Basic Socio-Economic fndices of China (continued) Region No. ENECOS VITAShIA VüASART MIORATL FRETGHT POPUL (tce/p) (cm/p ) ( sn/p) (Í/p') (L/pl (mIp) Beijing I 2.49 37 .4 8287 84.1 31 526 Tianjin 2 2.34 25.9 27 60 48 .4 22 749 Hebei 3 0.99 16.1 2603 84.6 9 327 Shanxi- 4 1.68 20.2 29LL 96.L 22 185 Inner Mongoli 5 L.L2 L2.L 327 3 87 .7 11 19 Liaoning 6 1.98 4L.3 7 406 80.3 1B 270 \rIIIn 7 L .42 23.2 2807 73.5 11 131 HeiJ-ongjiang I L .47 3L.7 L42B 83.0 11 7B Shanghai 9 2.38 99.6 ,Jiangsu LOO22 50.0 2L 17 59 10 0. B1 34.5 2181 7L.5 zhejiang 11 0.62 5 645 25.7 247 6 63.5 I 397 Anhui T2 0 .49 L7 .4 L267 83.1 6 Fujian 13 405 0.48 25.L 1959 63 .4 I 248 iliangxi L4 o .47 20.2 15 01 73.L Shangdong 15 0.80 5 228 10.3 L47 5 78.4 5 538 Henan 16 0.60 L2.L L229 83.2 Hubei I7 0.73 4 522 29.8 2686 65.9 I 292 Hunan 1B 0.62 30.8 18 06 73.7 6 289 Guangdong 19 0.64 22.L 2598 Guangxi 58.7 13 3s7 20 0.31 24.7 13 10 65.1 Hainan 2L 4 180 0.18 L2.L 24L 99.1 11 Sichuan 22 0.59 196 L8.2 1653 7 4.4 5 191 Guizhou 23 0.65 10.5 20L3 Yunnan 76.2 5 186 24 o .52 LL.4 14BB 63 .4 Xizang 25 0.00 0.6 9 97 Shaanxi 90 0.0 3 2 26 0.68 L2.L 113 0 80.5 Gansu 27 o.96 4 L6L L7 .O 337 9 70.9 6 56 Qinghai 28 1.13 15.3 2969 Ningxia 79.3 6 6 29 1.50 18.3 L97 9 92.0 xinjiang 30 1.35 B 91 10.1 16 81 80.9 6 9 268 Appendix 7-1 Basic Socio-Eco[omìc fndices of China ( continued) Region No. FORETGN OTLOUT PIGTRON ( us$,/p ) (nlr) (mlr) Beijing Tianjin 1 9L 0.00 3 .60 2 25L 4.7 0 1.40 Hebei 3 30 5.7L Shanxi 5.2L 4 B3 0.00 4.55 fnner Mongolia 5 20 0.00 2.BL Liaoning 6 295 13 .69 IL.46 iliIin 7 LL4 3 .57 o.7L Heilongjiang I 38 55 .62 0.60 Shanghai 9 sB7 0.00 5.27 iliangsu 10 49 0.86 L.54 Zhejiang 11 6L 0.00 0.60 Anhui L2 L2 o.02 2.86 Fujian 13 79 0.00 0.63 iliangxi L4 2L 0.00 0.89 Shangdong 15 44 33.51 2.88 Henan L6 11 8.82 L.7I Hubej- T7 22 0.83 5.05 Hunan 18 L4 0.00 Guangdong L.54 L9 205 o .47 0.81 Guangxi 20 1B 0.L2 0.59 Hai-nan 2L 54 0.00 0.02 Sichuan 22 L2 0.16 Guizhou 4.54 23 6 0.00 0.63 Yurrnan 24 15 0.00 Xizang L.20 25 0 0.00 0 .00 Shaanxi 26 16 0.70 Gansu 0.36 27 I L .46 o .49 ginghai 28 Ningxia 6 0.81 0.00 Xinjiang 29 L7 0.25 0.06 30 32 6.97 o .4L Note: m1t=mi].lion tonnes ; t=tonn_es ; p=person; tp=thousand persons tce=tonnes of coa]- equivalent; cm= cubic ; sm=square meter. metre. 269 Appendix 7-2 Factor Output Data Set Region No. Factor 1 Region No. Factor 2 r (4') (x > 1.0) r (4'l (x > Shanghai 1 3.50480 1.0) Liaoning 1 2 .37 565 Beijing 2 2.48326 Shanghai 2 Tianjin 3 1.69454 L.66787 Liaoning Hubei 3 1 .27 403 4 L.43869 Sichuan 4 L.14635 rI (4') (0 ( x < 1.0) rI (1s) (o(x<1.0) Heilongjiang 5 0.24920 Shanxi Hebei 5 0 .9L7 65 6 0.111684 Anhui 6 0.73089 Jl_Il_nl- 7 0.11011 ,Tiangsu iliangsu B 0.00344 7 0.47978 (11) ( Hunan 8 0.45228 rrr (-0.5 x Henan 9 0.44357 Guangdong 9 _ 0.01537 Hubei Shandong 10 0.33657 10 -0.L0967 Shanxi 11 0.32289 Xinjiang 11_ -0.11180 Guangxi Oinghai L2 0.21959 L2 -0.13541 zhejiang 13 0.14953 Zhejiang 13 -o.L44L7 ïnner Mongolia Guangdong L4 0.13969 L4 -0.19385 Jiangxi 15 0.12852 Hebei 15 -0.26969 Ningxia Guizhou L6 0.08042 L6 -0.28303 Fujian L7 0.06997 Shangdong 17 -0.3 267 5 Fujian fnner Mongolia 1g 0.0292L 18 -0.42007 Yunan L9 0.0L522 Gansu 19 -0.44881 rv (11) (x _ rrl (3) (-0.s ( x Gansu 20 - 0.2472L Shaanxi 20 -0.52677 Sichuan 2L Shaanxi 2L -0.36059 -0.524L6 Hainan 22 -0.3 6399 Hunan 22 -0.53536 rv (8) (x < iliangxi 23 -0.55540 -0.5 ) Anhui iliIin 23 -0.64501 24 -0.60561 Ningxia 24 -0.91885 Hainan 25 -0.61058 Henan Qinghai 25 -1.06906 26 -0.64808 Heilongjiang 26 Yunnan 27 -0.68832 -I.293L4 Guangxi Xinjiang 27 -1.378L9 28 -0.7 8369 Beijing 28 -1.59002 Guizhou 29 -0. B 0L46 Xizang Tianjin 29 -2.45650 30 -0.8 6283 Xizang 30 -2.657L4 270 Appendix 7-2 Factor Output Data Set (continued) Region No. Factor 3 Region No. Factor (3) r (x > 1.0) r (3) (x > 1.0) Shanxi l_ 2 .8397 L Liaoning HeiJ-ongjiang 1 3.03267 2 1.89525 Shandong 2 2.L3478 HeiJ-ongjiang 3 I .7 L954 rianjin rï (10) ( 3 1.36651 (0 x < 1.0) rr (6) (o ( x < 1.0) Hebei 4 0 .7 6]-59 iliangsu fnner Mongolia 4 0.65L26 5 0 .7L9LI Henan s 0.649L7 Shandong 6 0.60582 Xinjiang z}rejiang 6 0.4002s 7 0.59395 Liaoning 0.34643 Henan B 0.35789 7 Guangdong 8 0 .35446 Sichuan 9 0 .3567 3 Beijing Xinjiang 9 0 .27 038 10 0.27675 Hebei 10 0.00985 Ningxia 11 0.26577 (13) JII]-N ïrr (-0.5 ( x 12 0.10388 Guangxi 11 -0.01132 Qinghai 13 0.01018 Fujian rrr (10) (-0.5(x SUMI'IARY AND IMPLTCATTON The aim of this study is to explore the contempoïaïy rore of mineral industry in regional development based on China's recoïd of industrialization during the past forty years. Foï the purpose of evaluation' a target system is set up at the beginning of the study which undertakes to explore this issue in the light, of insights offered by the material intensive-use theories, the export-based theory and the centre-Periphery Hypothesis, together with a series of methods, Íncluding input-output, regression, factor and cruster analyses' Each of these theories and methods addresses a specific hypothesis following the order of the frow diagram in chapter rl and it can be summarized in the manner of Figure B-1. rnquiring into china's expeïiences, there is much evidence to support this generar hypothesis that mineral industry can act as a powerful instrument in furthering nati_onal, and ultimatery, reqional development. Fïom this evidence, it can be confirmed that the development of mineral industry can act as a cataryst in effecting the structural transformation of a country or a regÍon from an agrarian economy (dominated by the production of primary goods) to an industrial economy (led by the production of manufacturing goods) with a much higher rate of economic arowth in comparison with what went before. Furthermore, the evidence supports the view that expansion of minerar activities is instrumental in reinforcing the existing centre-periphery pattern in chinese regional growth ; a pattern which presides over the Consequences of economic develooment Consequences of spatial evolution i:'i iiìiÍir äÌliiiäiiiiitÌiïiiÌiiii¡iïiïjäT:irl:iiïir The contemporarv role of mineial ectiTrty in regionat development of devetoþing countries \\t--l/:-ll The general HI¡oothesis Figure 8-1 A Summary of Applied Development Theories and Related Methodologies 273 concentration of economic activity, particularly manufacturing industries' through the expansion of minerar-export activity. Arl the results coalesce to provide pointeïs as to the role of mineral activities in fostering regional development. These can be risted in summary form. A. rn the early stage of structural transformation, a rapid development of industrial production, particularly heavy industry, stimulates great increases in the domestic mineral consumption. Al0ng with such a change, therefore, a stable mineral supply of key ïesouïces/ particularly those well suited for the domestic market such as iron and steer, building materials, coar and oir, becomes a major factor of production to assuïe economic arowth. Moreoveï, the more developed the economy of a country oï a region becomes, the g.reater are the domestic demands. This is witnessed by the energy shortage which occurred in china just a few years after its economy began booming in consequence of the ',Operr Door" policy. B. under the pressure of an increasing demand, the most important object of economic arowth for a developing economy is to build up a reliable mineral supply system based on domestic resouïces if possibre. This saves foreign exchange on the one hand, whire ensuring that scare investment is not diverted to paying for moïe imports on the other. rt can be said that mineral production is a reflection of the way in which industry, çfovernment poT^rer 274 and society as a whole is organized., and it is a reflection of the way in which the mineral industry is perceived as the leading sector in the early stage of economic arow-th. c- The development of mineral production not only seïves to meet the needs of the domestic market but also forms the material basis for expanding foreign trade, so that the nationzs ability in both the import substitution of manufacturing goods and the mineral production itserf can be improved. D. At the beginning of minerar production, mining activity has always a strong spread-effect on regional deveropment through creating new jobs, attracting capital investment from both domestic and. foreign sources, and improving local infrastructure. what is more, it embeds outward orientationar services in the resouïce frontiers. Arl of these changes can be regarded as conspiring to provide a precondition for further development. E. As a consequence of developing the forward and backward linkages of mining activity, the more diversified mineral economy can provide a great opportunity for deepening structural transformation in the host region. There is a pitfall, hoÌrever, for spoliation of regional environment has become Íncreasingly significant as an accompaniment of the location of mineral-based manufacturing activities, particularly in large urban areas. F. Last, but not least, developmentarly-dominant effects 275 emerging from the growth of the mÍnerals economy can rearry shift the nature of regionar growth patterns in developing areas mainly through the development of the forward linkages of minerar activities creating growth poles abre to foster diversified deveropment. unfortunatery, these effects aïe not of sufficient magnitude to arter the entrenched centre- periphery structure which characterizes the country. on the contrary, that structure tends to be reinforced by virtue of the provision of an integrated transport infrastructurar system which grants a leading role to coïe regions in the development of mineral input-output relationships existing between them and their peripheral suppliers. As was said at the outset of this thesis, industrialization in deveroping countries is part of the globar rndustriar Revolution that began in Europe welr over two centuries ago. rt conforms to many of the same premises, exhibits many of the same traits, faces many of the same problems, and in most respects is defined in much the same way' As such, industrialization in china has essentially meant increasing exproitation of natural resouïces and energy harnessed to moïe technology. rt has meant, besides, a drive both to exert more extensive control over nature and to apply intensive uses of such mineral materÍals to raise cDp. Historicar evidence does suggest that the rore of a nationrs mineral-resource base in fostering economic arowth is very gïeat durÍng the early stages of the pïocess. Moïe to the point, mineral activity can provide the start of regional growth for many 276 production sequences and prepaïes a region for achievement of the "take off' point. considering regions as a gïoup, minerar activity lends its influence to the development of a rcentre-periphery' structure for the nation as a whore. using historical anarogies it can be argued that the importance of the mineral endowment to china/s developing economies is at the point where the wearth engendered by it can d.ef initely lubricate the growth path. ïJìIith this in mind' mineral wealth has been eagerly sought throughout the country since the 1950s. Resource shortage, particularry where it comes to bear on energy resourcesT has a considerabre growth_ restricting effect, while resouïce abundance is growth facilitating. The advantage of a productive mineral-resouïce base lies in its ability to permit the region which contains it not only to stimulate new techniques and to attract capitar from both domestic and foreign sources but also to provide opportunities to create new patterns of regional development. To be suïe, dt the nationar level, the development of the minerar industry does not change the ori-ginal pattern of the centre-periphery structure, rather it tends to reinfoïce the dominant position assumed by the centrar areas mainly through improving the prospects of ïar¡r_ materiar manufacturing carried out there. However, such a development does reshape the development patterns among the developing areas, elevating the well-being of those able to barter their mineral wealth. Yet, as the structural transformation runs its couïse Ín like fashion to what has occurred in the advanced-industrial countries, 277 economic structure T,ri1]- be transformed from a ,,products,, economy to a "processing and service" economy. ïn china, for instance, the tertiary industry ïose in importance in GDp by 7.5 per cent between I-981 and L992 while the secondary industry registered a rise of only 1.0 per cent and the primary industry actuarry recorded a decline, diminishing by 8.5 per cent. Also, minerar activity tends to become less important in creating new jobs in direct proportion to its increasing incrination to absorb moïe capital and technol0gy. According to chang T¡rei-min (1993), in 1993, ât least 140'000 coal workers had been laid-off from the state-run coal enterprises and transferred to other industries, maïry of them service businesses, because of a great effort to upgrade the technology and equipment of the coar industry. But these transitions in both economic structure and factor input do not mean that minerar ïesouïces have become ress vitar; rather, it suggests that mineral activity wilr remain important for regional development in the rater stage not onry because of its uneveïr spatial distribution, but also on account of the steadÍly increasing demand for minerars, both in quantity and kinds. rt follows, then, that deveropment of minerar industry will stilr disproportionatery benefit some rocalities, whire ignoring others, and continue to impact on the development of the ,'centïe_periphery,, structure. rn 1990, the total popuration of china reached L.L4 billion, an overwhelming number. rhis rarge base constitutes a zhuge denominator' in the equation of material intensive use. over the 278 past forty years, consumption of major basic materiars such as pig iron, cement, coar and crude oir increased 2s to 90 times, whire the population approximately doubled. rf the growth rate of china's popuration courd be maintained at the present rever (1.3 per cent annuar increase, the J-0west since Lgg4,), the consumption of mineral products would increase r.5 times for energy and nearly double for steel products, for example, 1'or the next decade even though there wirr have been no change in mineral consumption per capita. rn fact, all the signs suggests that there wil1 be consid.erable increases in minerals and energy consumption per capita in china owing to the changeabre consumption patterns disprayed by chinars households- rn 19902 moïe than s4 peï cent of the typical household/ s expenditure rÁras on food ( china / s statistics BureauT 1991-)' a finding in keeping with Iow-income countries in terms of Engelts Law. rt is veïy natural to expect that, as income continues to growth' the tendency of household expenditure will increasingly turn to better living conditions such as rarger living space, to say nothing of more durable goods and social services. BetrÂreen 19g5 and 1990, chinats overall househord expenditure increased nearly 0.8 times oï at an annual growth rate of Lz.L peï cent. rn the meantime, year-end possession of major durable goods such as bicycles, refrigerators, washing machines and terevisions lunit: set) for the average hundred peïsons increased from zL.L, 0.4, 2.9 and 6'6 g-4 to 34-2, 2.6, and 16.2 respectivery, whire per capita living space for the aveïage urban resident was enrarged by L.2 279 metTes (china's statistics Buïeau, 1gg1). rt is certain that such a changing pattern of househord expenditure wilr have a great influence on mineral and energy consumption. Both popuration growth and rising living standards are suïe to stimulate sharp rises in mineral and energy-ïesource consumption, and the mineral industry cannot fail. to expand in consequence. rn the newry-ended Eighth National peopre/s congress (Npc), the chinese government announced that the pranned annual growth rate of GNP for the 1990s in the seventh Npc ï^ras changed from 6 per cent to B or 9 per cent (Beijing Review, 1993). This means that the new development plan will trigger a fresh impetus to exploit all kinds of mineral and eneïgy supplies, and the existing tight rerationship between demand and supply of minerals and energy resouïces will be exacerbated even further if the goveïnment fails to push ahead with the development of the mineral industry. 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